TIDMSNR
RNS Number : 4947M
Senior PLC
31 July 2017
Interim Results for the half-year ended 30 June 2017
Trading in line with expectations
FINANCIAL HIGHLIGHTS Half-year to
30 June
2017 2016 % change % change
(constant
currency)
---------------------------- ----------- ----------- --------- -----------
REVENUE GBP510.0m GBP450.5m +13% +3%
---------------------------- ----------- ----------- --------- -----------
OPERATING PROFIT GBP28.9m GBP37.5m -23% -32%
ADJUSTED OPERATING PROFIT
(1) GBP37.5m GBP47.2m -21% -29%
ADJUSTED OPERATING MARGIN
(1) 7.4% 10.5% -3.1ppts -3.2ppts
---------------------------- ----------- ----------- --------- -----------
PROFIT BEFORE TAX GBP24.0m GBP32.6m -26% -35%
ADJUSTED PROFIT BEFORE
TAX (1) GBP32.6m GBP42.3m -23% -31%
---------------------------- ----------- ----------- --------- -----------
BASIC EARNINGS PER SHARE 4.73p 6.33p -25%
ADJUSTED EARNINGS PER
SHARE (1) 6.23p 8.07p -23%
---------------------------- ----------- ----------- ---------
INTERIM DIVID PER SHARE 2.05p 1.95p +5%
---------------------------- ----------- ----------- ---------
FREE CASH FLOW (2) GBP29.6m GBP17.3m +71%
---------------------------- ----------- ----------- ---------
NET DEBT (2) - JUNE GBP181.6m GBP207.3m - GBP26m
NET DEBT - DECEMBER 2016 GBP198.1m - GBP17m
---------------------------- ----------- ----------- ---------
Headlines
-- Trading in line with expectations
-- Healthy free cash inflow of GBP29.6m
-- Won additional airframe and engine content on
key commercial aircraft growth platforms
-- Interim dividend increased by 5% to 2.05 pence
per share
-- On track to deliver GBP4.0m annualised streamlining
savings from 2018
-- The Group is well positioned to increase market
share and deliver good growth over the medium
term
Commenting on the results, David Squires, Group Chief Executive
of Senior plc, said:
"Trading across the Group in the first half of 2017 has been in
line with expectations and the Group delivered a healthy cash
performance. Overall, the Board's expectation for 2017 remains
unchanged at current exchange rates.
In Aerospace, we anticipate an improved performance in the
second half of the year, as previously guided, driven by increasing
revenues and operational improvements as we continue our cost
reduction focus, particularly on our newer programmes. In Flexonics
we are seeing some signs of recovery in our end markets and
continue to believe that the end of 2017 will be an inflexion point
for our truck and off-highway and upstream oil and gas facing
businesses. As previously indicated, we continue to believe that
Flexonics performance will be marginally lower in 2017 compared to
2016.
Looking further ahead we remain positive about future prospects
with strong and visible growth in Aerospace and the anticipated
recovery in Flexonics."
For further information please contact:
Bindi Foyle, Group Finance Director,
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 GBP8.6m
charge for amortisation of intangible assets
from acquisitions (H1 2016 - GBP9.8m). In the
prior half-year, profit on sale of fixed assets
of GBP0.1m was also excluded. Adjusted earnings
per share takes account of the tax impact of
these items.
(2) See Notes 12(b) and 12(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 $1.27 (H1 2016 - $1.42) and
EUR1.17 (H1 2016 - EUR1.28), respectively. The US dollar and Euro
rates applied to the Balance Sheet at 30 June 2017 were $1.30
(December 2016 - $1.24, June 2016 - $1.34) and EUR1.14 (December
2016 - EUR1.17, June 2016 - EUR1.20), respectively.
Webcast
There will be a presentation on Monday 31 July 2017 at 11.00am
BST, with a live webcast that is accessible on Senior's website at
www.seniorplc.com/investors. The webcast will be made available on
the website for subsequent viewing.
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 2017
Overview
Trading across the Group in the first half of 2017 has been in
line with expectations and the Group delivered a healthy cash
performance.
Group revenue increased by 13% to GBP510.0m (H1 2016 -
GBP450.5m). Excluding a favourable exchange rate impact of
GBP44.5m, Group revenue was up GBP15.0m (3%) on a constant currency
basis with sales increasing across both divisions. Revenue growth
in the Aerospace Division was driven by large commercial aerospace
and a book to bill ratio of 1.3 is encouraging. Revenue growth in
the Flexonics Division was driven by higher revenue from
off-highway and upstream oil and gas markets, partly offset by
lower on-highway, downstream oil and gas, and power and energy
revenue.
Adjusted operating profit decreased by GBP9.7m (21%) to GBP37.5m
(H1 2016 - GBP47.2m). Excluding a favourable exchange rate impact
of GBP5.3m, adjusted operating profit decreased by 29% on a
constant currency basis. The Group continues to make progress on
operational improvements, cost management and efficiency
initiatives, consistent with the position set out in the
announcement of 20 April 2017. As expected, margins were impacted
by the transition from more mature aerospace programmes to the new
airframe and engine products, and by the market-led reductions in
volumes of the high margin segments of the Flexonics Division.
These resulted in the Group's adjusted operating margin reducing by
3.1 percentage points to 7.4%.
Adjusted profit before tax decreased to GBP32.6m (H1 2016 -
GBP42.3m), down 23%, or 31% on a constant currency basis. Adjusted
earnings per share decreased by 23% to 6.23 pence (H1 2016 - 8.07
pence).
Reported operating profit was GBP28.9m (H1 2016 - GBP37.5m),
reported profit before tax was GBP24.0m (H1 2016 - GBP32.6m) and
basic earnings per share was 4.73 pence (H1 2016 - 6.33 pence).
The Group generated free cash inflow of GBP29.6m (H1 2016 -
GBP17.3m) after gross investment in capital expenditure of GBP20.6m
(H1 2016 - GBP22.8m). Working capital as a percentage of sales
improved to 14.2% at the end of June 2017 (December 2016 - 15.1%).
The level of net debt at the end of June 2017 was GBP181.6m
(December 2016 - GBP198.1m). This decrease was principally due to
free cash inflow of GBP29.6m and favourable currency movements of
GBP6.1m, partly offset by GBP19.4m of dividend payments. The ratio
of net debt to EBITDA at the end of June 2017 was 1.6x, comfortably
below the Group's bank covenant level of 3.0x.
Recognising the underlying strength of the business and its
future prospects, the Board has approved an interim dividend of
2.05 pence per share, an increase of 5% over the prior year (H1
2016 - 1.95 pence). It will be paid on 30 November 2017 to
shareholders on the register at the close of business on 20 October
2017.
Market conditions
The production ramp-up of new engine option large commercial
aircraft means the outlook for the commercial aerospace sector is
both strong and visible. Air traffic grew by 8% in the first five
months of 2017 and demand for new aircraft remains robust with
Boeing, Airbus and independent forecasters predicting air traffic
to grow in excess of 4% per annum over the next 20 years. Senior
has healthy shipset content on all the key large commercial
aircraft platforms and has further increased its content on the new
engine versions in the first half of this year. With significantly
higher content on the new engine A320neo, 737 MAX and A330neo than
the current engine versions, the Group is expected to outgrow the
market, as these new engine versions come into service and
production ramps up. Customer deliveries of the 737 MAX began in
May 2017 and production of the A320neo continues to ramp up, whilst
the A330neo is scheduled to enter service in 2018.
In the regional jet market, the C Series continues to ramp up
deliveries and the Group is also expected to benefit from the
Embraer E2-Jet and the Mitsubishi MRJ, which are anticipated to
enter into service in 2018 and 2020, respectively. In the defence
sector, military spending has stabilised and Senior is well
positioned on the key growth platforms, particularly the Joint
Strike Fighter which is scheduled to ramp-up significantly between
now and the end of the decade.
Market production of North American heavy-duty diesel trucks
declined 8% in first half of 2017 compared to first half of 2016,
but is forecast to improve in the second half of the year. Whilst
there has been some improved activity in the upstream oil and gas
sector associated with recommissioning activities, with increased
rig counts in North America, we continue to believe it will be the
end of the year before we see meaningful improvements in our
businesses. On the downstream side, although repair and overhaul
activities have been reasonable in first half of the year, there
are still very few major projects being launched and we believe
recovery in this sector will lag the upstream recovery by at least
a year.
Operational review
The streamlining and structural cost improvement activities that
we previously announced have been progressing satisfactorily in the
first half of 2017. These streamlining actions are still
anticipated to cost GBP4.0m in 2017, of which GBP2.1m was incurred
in the first half, and we remain on track to deliver savings of
GBP1.0m in 2017, with annualised savings of GBP4.0m from 2018.
In our Aerospace Division, the closure of the BWT Ilkeston site
is proceeding and will be concluded later this year once existing
contract commitments to customers have been satisfied. In San Diego
we have combined our Aerospace Structures Ketema and Jet Products
businesses under one leadership team which is proving beneficial
from a capacity utilisation, cost and customer focus perspective.
We have also combined our Aerospace Structures AMT and Absolute
businesses: these businesses are on the same campus in Arlington,
Washington State so this will provide operational efficiencies and
back office savings.
In our Flexonics Sao Paulo business we have implemented the cost
savings actions previously described to reflect market conditions.
We are currently finalising the plan to relocate our Crumlin South
Wales operation to a smaller high tech facility focused on design,
test and qualification of new products, which will be built around
the world in our existing cost competitive locations. In our
Flexonics business in Chicago, having provisionally entered into a
sale agreement and leaseback of a significantly reduced footprint,
we have re-evaluated our options in light of customer requests to
slow down the transfer of certain products out of the US, and an
alternative cost effective plan is being developed.
We are continuing to invest in capacity in our existing cost
competitive country locations for both our Flexonics and Aerospace
businesses to enable us to meet increasing order levels from our
customers and to ensure we remain competitive and profitable. Work
has now commenced to expand our highly efficient Flexonics plant in
the Czech Republic and we anticipate opening the factory extension
towards the end of this year. As a direct consequence of winning
new aerospace single aisle work we have decided to add a new
factory in Malaysia, close to our existing operations: work will
commence this year and be completed in 2018. Additionally we are
reviewing capacity plans in our Flexonics India business and our
Flexonics JV in China as both these facilities have continued to
win new long term business.
In response to the decline in build rates of some of our more
profitable mature programmes, such as the 777, cost reduction
efforts are being re-doubled to improve the returns on some of our
newer work packages. This will be an area of focus on an ongoing
basis as we continue to win new business and on-board many new
products. Good progress has been made in the first six months of
this year in reducing both labour and material costs on some of our
largest new programmes. Cost reductions are being achieved through
our lean manufacturing programme and through the use of the
state-of-the-art high speed and high performance equipment that we
have been investing in. We will see the benefits of these actions
incrementally helping margins over coming months and years.
In addition to the streamlining activities previously described,
we will continue to implement operational actions on a business by
business basis where appropriate. Furthermore, collaboration
activities across the Group are evident with multiple business
units working together to bring the most cost competitive solutions
to our customers.
Outlook
The Board's expectation for 2017 remains unchanged, at current
exchange rates. In Aerospace, we anticipate an improved performance
in the second half of the year, as previously guided, driven by
increasing revenues and operational improvements as we continue our
cost reduction focus, particularly on our newer programmes. In
Flexonics we are seeing some signs of recovery in our end markets
and continue to believe that the end of 2017 will be an inflexion
point for our truck and off-highway and upstream oil and gas facing
businesses. As previously indicated, we continue to believe that
Flexonics performance will be marginally lower in 2017 compared to
2016.
Looking further ahead, Senior expects to make progress from 2018
onwards as Aerospace production programmes ramp up and Flexonics
markets recover, and as the benefits of the implementation of the
high performance operating system and cost saving actions are
delivered. Staying focused on customer alignment, operational
excellence and investing in organisational capability and
leadership talent will enable Senior to continue to grow
organically over the longer-term. 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 71% (H1 2016 - 72%) 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
2017 2016 (1) Change
GBPm GBPm
Revenue 362.7 354.3 +2.4%
Adjusted operating profit 34.6 45.0 -23.1%
Adjusted operating margin 9.5% 12.7% -3.2ppts
(1) H1 2016 results translated using H1 2017 average
exchange rates - constant currency.
Divisional revenue increased by GBP8.4m (2%) to GBP362.7m (H1
2016 - GBP354.3m(1) ) whilst adjusted operating profit decreased by
GBP10.4m (23%) to GBP34.6m (H1 2016 - GBP45.0m(1) ).
Revenue Reconciliation GBPm
H1 2016 revenue(1) 354.3
Large commercial 10.0
Regional & business jets (0.7)
Military (3.8)
Other 2.9
------
H1 2017 revenue 362.7
======
The Division's most important market is large commercial
aircraft where Boeing and Airbus collectively delivered 658
aircraft in the first half of 2017, 2.2% less than the prior year.
Senior's sales in the large commercial aircraft sector increased by
5%(1) during the six-month period to 30 June 2017, as the Group
benefited from increased production of the A350, A320neo and 737
MAX, which began customer deliveries in May 2017; however, these
increases were partly offset by the decline in build rates of the
777, 747, A380 and the current engine versions of the 737 and
A320.
The Division's sales to the regional jet market increased by 6%
in the period(1) , mainly as a result of increased production of
Bombardier's C Series. Revenue derived from the business jet sector
declined by 10% in the period(1) as a result of continuing market
weakness.
Total revenue from the military and defence sector decreased by
6% during the period(1) , due to lower A400M sales, reductions in
build rates of the Black Hawk helicopter, and lower Joint Strike
Fighter content.
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. Revenue derived from these markets
increased by 10%(1) , mainly due to strong demand for Senior's
proprietary products for the semi-conductor equipment market.
The divisional adjusted operating margin declined by 3.2
percentage points to 9.5% (H1 2016 - 12.7%)(1) . As anticipated,
margins were impacted by the year-on-year volume reductions on
mature programmes such as the 777, 747, A380 and the current engine
versions of the 737 and A320, and costs associated with the ramp-up
of new aircraft production programmes such as the 737MAX, A320neo,
A350 and C Series. The first half adjusted operating profit also
includes GBP1.8m costs related to streamlining actions. Improvement
in performance is anticipated in the second half of this year
driven by increasing revenues and operational improvements as we
continue our cost reduction focus, particularly on our newer
programmes.
During the first half of 2017, Senior successfully won
additional content on 737 MAX (+6%), A320neo (+6%), A330neo (+16%)
and A350 (+1%), all of which are forecasting significant increases
in production over the coming years. Significant additional content
was also won on 777X (+62%), which is scheduled to enter service in
2020.
Overall the future prospects for the Group's Aerospace Division
are visible and remain strong.
Flexonics Division
The Flexonics Division represents 29% (H1 2016 - 28%) 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 China where the
Group also has a 49% equity stake in a land vehicle joint venture.
The Division's operating results on a constant currency basis are
summarised below:
Half-year Half-year
ended ended
30 June 30 June
2017 2016 (1) Change
GBPm GBPm
Revenue 147.8 140.9 +4.9%
Adjusted operating profit 9.8 12.3 -20.3%
Adjusted operating margin 6.6% 8.7% -2.1ppts
(1) H1 2016 results translated using H1 2017 average
exchange rates - constant currency.
Divisional revenue increased by GBP6.9m (5%) to GBP147.8m (H1
2016 - GBP140.9m(1) ) and adjusted operating profit decreased by
GBP2.5m (20%) to GBP9.8m (H1 2016 - GBP12.3m(1) ).
Revenue Reconciliation GBPm
H1 2016 revenue(1) 140.9
Truck and off-highway 5.2
Passenger vehicles (1.3)
Industrial 2.3
Other 0.7
------
H1 2017 revenue 147.8
======
Group sales to truck and off-highway markets increased by 12%(1)
. Senior's sales to the North American truck market decreased by
GBP2.3m (10%), primarily due to lower sales of EGR coolers for new
vehicles as heavy-duty truck production declined. Sales to the
North American off-highway market increased by GBP5.6m (53%) due to
launch of new EGR cooler programmes and improved off-highway
replacement demand. Sales to European truck and off-highway markets
were flat, and the Group benefited by GBP1.9m (76%) increased sales
from new truck and off-highway programmes in India and China.
Group sales to passenger vehicle markets decreased slightly by
GBP1.3m (4%) in the period(1) , as a result of North American
programmes coming to the end of their life and the ramp up of the
next generation of European programmes not yet being sufficient to
offset the decline in programmes they are replacing.
In the Group's industrial markets, sales were up by GBP2.3m (4%)
in the period(1) . Sales to oil and gas markets were up GBP4.9m
(20%) primarily due to some increased upstream oil and gas rig
recommissioning activity. Sales to power and energy markets
decreased by GBP1.8m (10%) due to continued weakness in North
American coal and gas fired power generation markets.
The adjusted operating margin decreased to 6.6% (H1 2016 -
8.7%)(1) principally due to volume reductions in the higher margin
segments, particularly truck, downstream oil and gas and power and
energy, as well as change in mix of passenger vehicles. Although
the Group benefited from higher volumes from off-highway and
upstream oil and gas, this was primarily from lower margin
products. As a result, overall margins for the division decreased.
The first half adjusted operating profit also includes GBP0.3m
costs related to streamlining actions.
Production of North American heavy-duty diesel trucks is
forecast to improve in the second half of the year, as a result of
improved freight activity and some reduction in excess truck
capacity. Whilst there has been some improved activity in the
upstream oil and gas market with increased rig counts in North
America, we still believe it will be the end of the year before we
see meaningful improvements in our businesses. Downstream oil and
gas activity is expected to remain subdued.
Looking further ahead, global environmental legislation
continues to tighten, which coupled with projected increases in
global energy usage, will drive increased demand for many of the
Flexonics Division's products. Senior is developing solutions for
the next generation of more efficient internal combustion engines,
as well as electrified land vehicle applications. 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.
OTHER FINANCIAL INFORMATION
Central costs
Central costs increased to GBP7.2m (H1 2016 - GBP4.9m) due to
dilapidation costs relating to the sub-lease of a legacy site in
the UK, the effects of strengthening the Group HR and Health,
Safety & Environmental capabilities, legal costs incurred
related to actions as described in Note 16 of the Condensed
Consolidated Interim Financial Statements, and adverse foreign
exchange movements on translation of non-Sterling costs.
Finance costs
Total finance costs, net of investment income of GBP0.1m (H1
2016 - GBP0.1m), were unchanged at GBP4.9m (H1 2016 - GBP4.9m) as
the adverse foreign exchange impact on the translation of interest
charges on US dollar denominated borrowings was offset by lower
interest rates on private placements. The net IAS 19 pension
finance cost of GBP0.1m remains consistent with H1 2016.
Tax charge
The total tax charge decreased to GBP4.2m (H1 2016 - GBP6.1m)
resulting in a tax rate of 17.5% (H1 2016 - 18.7%) on profit before
tax. Excluding the tax benefit of GBP2.3m (H1 2016 - GBP2.4m)
arising from amortisation of intangible assets from acquisitions,
the adjusted tax charge was GBP6.5m (H1 2016 - GBP8.5m) resulting
in an adjusted tax rate of 20% (H1 2016 - 20%) 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 418.9
million (H1 2016 - 418.8 million). The increase arose principally
due to vesting of share awards. Adjusted earnings per share
decreased by 23% to 6.23 pence (H1 2016 - 8.07 pence). Basic
earnings per share decreased by 25% to 4.73 pence (H1 2016 - 6.33
pence). See Note 7 of the Condensed Consolidated Interim Financial
Statements for details of the basis of these calculations.
Working capital
Working capital improved by 0.9ppts from 15.1% of sales at 31
December 2016 to 14.2% of sales at 30 June 2017, principally due to
1.1ppts reduction from payables in excess of receivables and
0.3ppts reduction from exchange differences, whilst inventory to
support new product introductions contributed a 0.5ppts
increase.
Capital expenditure
Capital expenditure of GBP20.6m (H1 2016 - GBP22.8m) was 1.0
times depreciation (H1 2016 - 1.4 times), with the majority of
investment related to growth programmes in the Aerospace Division.
In particular, GBP3.7m was invested in Thailand and Malaysia
supporting A350 and 787 programmes. In the USA, GBP10.2m was
invested in capacity expansions, equipment replacements and tooling
to support increasing build rates. In the Czech Republic, GBP1.7m
was invested in facility expansion. Capital expenditure is expected
to be higher than depreciation in the second half of the year as
previously advised as investments continue, supporting future
growth programmes.
Retirement benefit schemes
The retirement benefit asset in respect of the Group's UK
defined benefit pension funded scheme increased by GBP6.0m to
GBP10.0m (30 June 2016 - GBP2.7m obligation; 31 December 2016 -
GBP4.0m asset), principally due to GBP3.9m cash contributions in
excess of running costs made by the Group and GBP2.2m experience
gain on the scheme assets compared to actuarial assumptions.
Retirement benefit obligations in respect of the US and other
territories decreased by GBP1.2m to GBP13.2m (30 June 2016
GBP17.0m; 31 December 2016 - GBP14.4m), principally due to GBP0.9m
cash contributions in excess of service costs made by the
Group.
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
During the first half of 2017 the principal risks and
uncertainties faced by the Group have been reassessed. Following
the review, two risks set out in detail on pages 27 to 29 of the
Annual Report & Accounts 2016 (available at www.seniorplc.com)
are no longer considered to be principal risks and two new
principal risks have been added. The Group's principal risks and
uncertainties as at 30 June 2017 are summarised as:
-- New aircraft platform delays
-- Importance of emerging markets
-- Price-down pressures
-- Acquisitions
-- Programme participation
-- Corporate governance breach
-- Financing and liquidity
-- Geo-political impact
-- Cyber/information security
-- Innovation and technological change - new principal
risk
Concerned with ensuring the Group continues to
innovate and implement technological change to
avoid its technology from becoming uncompetitive
or obsolete.
-- New product introduction - new principal risk
Concerned with ensuring new products are introduced
to schedule, quality and cost at a time when
new programmes are ramping up.
The two risks which are no longer considered to be
principal risks are:
-- Employee retention
Improvements in the Group's succession planning
process together with ongoing in-house development
programmes has reduced both the likelihood, and
resulting impact, of not being able to attract,
develop and retain high quality individuals.
-- Strategy
The Group has strengthened the strategic planning
process, thereby reducing the likelihood of the
Group's strategy not being appropriately formulated,
communicated and effectively executed.
Overall, the Board does not anticipate any significant change in
the likely impact of these risks.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
1. the condensed set of 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 Bindi Foyle
Group Chief Executive Group Finance Director
28 July 2017 28 July 2017
INDEPENT REVIEW REPORT TO SENIOR PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises Condensed
Consolidated Income Statement, the Condensed Consolidated Statement
of Comprehensive Income, the Condensed Consolidated Balance Sheet,
Condensed Consolidated Statement of Changes in Equity, the
Condensed Consolidated Cash Flow Statement and the related
explanatory notes.
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 2017 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
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
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) 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.
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 DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The Directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
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.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this 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
reached.
Robert Brent
for and on behalf of KPMG LLP
Chartered Accountants
London
28 July 2017
Condensed Consolidated Income Statement
For the half-year ended 30 June 2017
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2017 2016 2016
GBPm GBPm GBPm
Revenue 3 510.0 450.5 917.0
---------- ---------- --------
Trading profit 28.8 37.2 65.1
(Loss)/profit on sale of
fixed assets (0.2) 0.1 -
Share of joint venture
profit 9 0.3 0.2 0.7
Operating profit (1) 3 28.9 37.5 65.8
Investment income 0.1 0.1 0.2
Finance costs (5.0) (5.0) (10.5)
---------- ---------- --------
Profit before tax (2) 24.0 32.6 55.5
Tax 5 (4.2) (6.1) (10.1)
---------- ---------- --------
Profit for the period 19.8 26.5 45.4
---------- ---------- --------
Attributable to:
Equity holders of the parent 19.8 26.5 45.4
---------- ---------- --------
Earnings per share
Basic (3) 7 4.73p 6.33p 10.84p
---------- ---------- --------
Diluted (4) 7 4.70p 6.26p 10.83p
---------- ---------- --------
(1) Adjusted operating
profit 4 37.5 47.2 85.6
(2) Adjusted profit before
tax 4 32.6 42.3 75.3
(3) Adjusted earnings
per share 7 6.23p 8.07p 14.37p
(4) Adjusted and diluted
earnings per share 7 6.20p 7.98p 14.36p
----------------------------- --- ------- ------- --------
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2017
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Profit for the period 19.8 26.5 45.4
Other comprehensive income:
Items that may be reclassified
subsequently to profit
or loss:
Gains/(losses) on cash
flow hedges during the
period 6.6 (3.7) (9.8)
Reclassification adjustments
for (gains)/losses included
in profit (0.9) 0.4 0.7
---------- ---------- --------
Gains/(losses) on cash
flow hedges 5.7 (3.3) (9.1)
Foreign exchange gain recycled
to the Income Statement
on disposal of business - (0.4) (0.4)
Exchange differences on
translation of foreign
operations (10.5) 41.4 62.6
Tax relating to items that
may be reclassified (1.2) 1.1 2.1
---------- ---------- --------
(6.0) 38.8 55.2
Items that will not be
reclassified subsequently
to profit or loss:
Actuarial gains/(losses)
on defined benefit pension
schemes 2.4 (7.2) (5.1)
Tax relating to items that
will not be reclassified (0.2) 1.6 0.5
---------- ---------- --------
2.2 (5.6) (4.6)
Other comprehensive income
for the period, net of
tax (3.8) 33.2 50.6
---------- ---------- --------
Total comprehensive income
for the period 16.0 59.7 96.0
---------- ---------- --------
Attributable to:
Equity holders of the parent 16.0 59.7 96.0
---------- ---------- --------
Condensed Consolidated Balance Sheet
As at 30 June 2017 30 June 30 June 31 Dec
Notes 2017 2016 2016
GBPm GBPm GBPm
Non-current assets
Goodwill 8 309.9 305.8 318.8
Other intangible assets 50.7 67.6 60.5
Investment in joint venture 9 2.0 1.2 1.7
Property, plant and equipment 10 248.3 233.5 254.2
Deferred tax assets 5.9 8.2 6.6
Loan to joint venture 9 0.5 0.3 0.9
Retirement benefit asset 11 10.0 - 4.0
Trade and other receivables 0.5 0.4 0.3
-------- -------- -------
Total non-current assets 627.8 617.0 647.0
-------- -------- -------
Current assets
Inventories 156.8 147.0 154.4
Loan to joint venture 9 - 1.0 -
Current tax receivables 0.8 2.2 0.7
Trade and other receivables 163.5 168.6 152.5
Cash and bank balances 12 22.3 13.5 17.5
Asset classified as held
for sale 13 4.0 - 4.2
-------- -------- -------
Total current assets 347.4 332.3 329.3
-------- -------- -------
Total assets 975.2 949.3 976.3
-------- -------- -------
Current liabilities
Trade and other payables 177.5 164.5 164.8
Current tax liabilities 24.8 20.3 21.5
Obligations under finance
leases 12c) 0.4 0.7 0.5
Bank overdrafts and loans 12c) 10.0 65.3 44.9
Provisions 14 4.0 1.8 3.6
Total current liabilities 216.7 252.6 235.3
-------- -------- -------
Non-current liabilities
Bank and other loans 12c) 193.2 154.1 169.7
Retirement benefit obligations 11 13.2 17.0 14.4
Deferred tax liabilities 51.2 52.5 55.2
Provisions 14 0.2 - -
Obligations under finance
leases 12c) 0.3 0.7 0.5
Others 2.5 0.7 0.7
-------- -------- -------
Total non-current liabilities 260.6 225.0 240.5
-------- -------- -------
Total liabilities 477.3 477.6 475.8
-------- -------- -------
Net assets 497.9 471.7 500.5
-------- -------- -------
Equity
Issued share capital 15 41.9 41.9 41.9
Share premium account 14.8 14.8 14.8
Equity reserve 2.9 3.6 3.0
Hedging and translation
reserve 36.3 25.9 42.3
Retained earnings 403.1 387.2 400.0
Own Shares (1.1) (1.7) (1.5)
-------- -------- -------
Equity attributable to
equity holders of the parent 497.9 471.7 500.5
-------- -------- -------
Total equity 497.9 471.7 500.5
-------- -------- -------
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2017
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
2016 41.9 14.8 4.5 (12.9) 384.7 (2.1) 430.9
-------- -------- -------- ------------ --------- -------- -------
Profit for the
period - - - - 45.4 - 45.4
Losses on cash
flow hedges - - - (9.1) - - (9.1)
Foreign exchange
gain recycled
to the Income
Statement on disposal
of business - - - (0.4) - - (0.4)
Exchange differences
on translation
of foreign operations - - - 62.6 - - 62.6
Actuarial losses
on defined benefit
pension schemes - - - - (5.1) - (5.1)
Tax relating to
components of
other comprehensive
income - - - 2.1 0.5 - 2.6
-------- -------- -------- ------------ --------- -------- -------
Total comprehensive
income for the
period - - - 55.2 40.8 - 96.0
Share-based payment
charge - - 1.1 - - - 1.1
Purchase of shares
held by employee
benefit trust - - - - - (1.1) (1.1)
Use of shares
held by employee
benefit trust - - - - (1.7) 1.7 -
Transfer to retained
earnings - - (2.6) - 2.6 - -
Dividends paid - - - - (26.4) - (26.4)
-------- -------- -------- ------------ --------- -------- -------
Balance at 31
December 2016 41.9 14.8 3.0 42.3 400.0 (1.5) 500.5
-------- -------- -------- ------------ --------- -------- -------
Profit for the
period - - - - 19.8 - 19.8
Gains on cash
flow hedges - - - 5.7 - - 5.7
Exchange differences
on translation
of foreign operations - - - (10.5) - - (10.5)
Actuarial gains
on defined benefit
pension schemes - - - - 2.4 - 2.4
Tax relating to
components of
other comprehensive
income - - - (1.2) (0.2) - (1.4)
-------- -------- -------- ------------ --------- -------- -------
Total comprehensive
income for the
period - - - (6.0) 22.0 - 16.0
Share-based payment
charge - - 0.9 - - - 0.9
Purchase of shares
held by employee
benefit trust - - - - - (0.1) (0.1)
Use of shares
held by employee
benefit trust - - - - (0.5) 0.5 -
Transfer to retained
earnings - - (1.0) - 1.0 - -
Dividends paid - - - - (19.4) - (19.4)
-------- -------- -------- ------------ --------- -------- -------
Balance at 30
June 2017 41.9 14.8 2.9 36.3 403.1 (1.1) 497.9
-------- -------- -------- ------------ --------- -------- -------
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 2016 41.9 14.8 4.5 (12.9) 384.7 (2.1) 430.9
-------- -------- -------- ------------ --------- -------- -------
Profit for the
period - - - - 26.5 - 26.5
Losses on cash
flow hedges - - - (3.3) - - (3.3)
Foreign exchange
gain recycled
to the Income
Statement on
disposal of business - - - (0.4) - - (0.4)
Exchange differences
on translation
of foreign operations - - - 41.4 - - 41.4
Actuarial losses
on defined benefit
pension schemes - - - - (7.2) - (7.2)
Tax relating
to components
of other comprehensive
income - - - 1.1 1.6 - 2.7
-------- -------- -------- ------------ --------- -------- -------
Total comprehensive
income for the
period - - - 38.8 20.9 - 59.7
Share-based payment
charge - - 0.4 - - - 0.4
Purchase of shares
held by employee
benefit trust - - - - - (1.0) (1.0)
Use of shares
held by employee
benefit trust - - - - (1.4) 1.4 -
Transfer to retained
earnings - - (1.3) - 1.3 - -
Dividends paid - - - - (18.3) - (18.3)
-------- -------- -------- ------------ --------- -------- -------
Balance at 30
June 2016 41.9 14.8 3.6 25.9 387.2 (1.7) 471.7
-------- -------- -------- ------------ --------- -------- -------
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2017
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2017 2016 2016
GBPm GBPm GBPm
Net cash from operating
activities 12a) 49.9 39.5 100.3
---------- ---------- --------
Investing activities
Interest received 0.2 0.1 0.2
Proceeds on disposal of
property, plant and equipment 0.1 0.5 0.8
Purchases of property,
plant and equipment (19.4) (21.9) (50.7)
Purchases of intangible
assets (1.2) (0.9) (2.1)
Proceeds on disposal of
business - 1.5 1.3
Loan repayment from joint
venture 9 0.3 - 0.5
Net cash used in investing
activities (20.0) (20.7) (50.0)
---------- ---------- --------
Financing activities
Dividends paid (19.4) (18.3) (26.4)
New loans raised 73.6 26.9 39.2
Repayment of borrowings (77.8) (28.9) (58.7)
Repayments of obligations
under finance leases (0.3) (0.4) (0.8)
Purchase of shares held
by employee benefit trust (0.1) (1.0) (1.1)
Net cash used in financing
activities (24.0) (21.7) (47.8)
---------- ---------- --------
Net increase/ (decrease)
in cash and cash equivalents 5.9 (2.9) 2.5
Cash and cash equivalents
at beginning of period 16.8 11.6 11.6
Effect of foreign exchange
rate changes (0.4) 1.9 2.7
---------- ---------- --------
Cash and cash equivalents
at end of period 12 22.3 10.6 16.8
---------- ---------- --------
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 28 July 2017, 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 2016 do
not constitute the Group's statutory accounts for 2016 as defined
in Section 434(3) of the Companies Act 2006. Statutory accounts for
2016 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. 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 at least 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 2016 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 2016.
There are no material new standards, amendments to standards or
interpretations which are effective for the half-year ended 30 June
2017.
At the date of authorisation of these Condensed Consolidated
Interim Financial Statements, a number of new standards and
amendments to existing standards have been issued but are not yet
effective and, for IFRS 16, not yet endorsed by the EU. They have
not been adopted early in these Condensed Consolidated Interim
Financial Statements. A summary of the impact review performed on
each standard is given below. None of these changes will have an
effect on net cash from operating activities nor on free cash
flow.
a) IFRS 9 Financial instruments - Effective for annual periods
beginning 1 January 2018, EU endorsed in 2016. This standard covers
the classification, measurement, impairment and derecognition of
financial assets and financial liabilities together with a new
hedge accounting model. It will replace IAS 39 Financial
Instruments. The Group does not expect the transition to this
standard to have a material impact on the Condensed Consolidated
Interim Financial Statements.
b) IFRS 15 Revenue from Contracts with Customers - Effective for
annual periods beginning 1 January 2018, EU endorsed in 2016. This
standard requires the separation of performance obligations within
contracts with customers and the contractual value to be allocated
to each of the performance obligations. Revenue is then recognised
as each performance obligation is satisfied. This standard will
replace existing revenue recognition standards.
Retrospective application in the comparative year ending 31
December 2017 is optional. The Group expects that it will not take
this optional application and will apply the standard from the
transitional date using the cumulative effect method. This involves
calculating the relevant adjustments required for contracts not
completed as at the transition date of 1 January 2018.
An initial impact assessment has been performed by reviewing all
contract types across the Group. This assessment highlighted that
if the standard were to be applied in 2016, the cumulative impact
on adoption
would not be material to either the Group's reported revenue or
profit before tax. The majority of this required adjustment would
relate to contracts in the Aerospace Division where customer
contributions of goods may be received to facilitate the Group's
fulfilment of the customer contracts. The standard requires such
goods to be treated as non-cash consideration and recognised at
their fair value in revenue and cost of sales when the performance
obligations in the customer contracts are met. This introduces
timing differences when comparing to the current recognition. There
is no impact on the timing of receipt of cash consideration, which
is determined within the underlying customer contracts. The
required adjustment expected at the transition date will be
impacted by future changes such as customer contract renewals,
terminations and modifications, as well as exchange rate
fluctuations.
The process of implementation is complex, as all Divisions will
be affected and may need to implement new information systems and
processes to collect the required information. The Group will
continue to monitor the impact until the transition date, providing
further quantitative and qualitative measures as further progress
is made on implementation.
c) IFRS 16 Leases - Effective for annual periods beginning 1
January 2019, subject to EU endorsement.
This standard, which will replace IAS 17, requires lessees to
recognise assets and liabilities for all leases, unless the lease
term is 12 months or less or the underlying asset is low value. As
at 31 December 2016, the Group held a significant number of
operating leases which, under IAS 17, are expensed on a
straight-line basis over the lease term.
Retrospective application in the comparative year ending 31
December 2018 is optional. The Group expects that it will not take
this optional application and will apply the standard from the
transitional date using the modified retrospective approach,
adjusting opening retained earnings and not re-stating
comparatives. This involves calculating the right-of-use asset and
lease liability based on the present value of remaining lease
payments on all applicable lease contracts as at the transition
date.
The Group has initiated a process to collect operating lease
information across all the Divisions in order to assess the
cumulative adjustment on transition. Based on an initial analysis
performed for the year ending 31 December 2016, had the new
requirements been adopted in 2016, profit before tax would have
decreased by an immaterial amount, whilst it is estimated lease
liabilities and property, plant and equipment would have increased
between GBP50m and GBP70m. This is expected to result in an
increase of the Group's principal lending covenant, the ratio of
net debt to EBITDA by 0.2x to 0.5x, except where it is determined
at constant accounting standards. The ranges disclosed reflect the
sensitivity of the adjustment to a +/-3 percentage point movement
in the discount rate used to calculate the present value of the
future cash flow commitments. The discount rate, the renewal of and
changes to the lease portfolio and exchange rates on translation of
financial statements of non-Sterling operations are all subject to
change in future years, which will impact the actual transitional
adjustment as at the expected transition date.
The Group will continue to monitor the impact until the
transition date, providing further quantitative and qualitative
measures as progress is made on implementation.
The preparation of the Condensed Consolidated 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 2016. The Consolidated
Financial Statements are available via Senior's website
www.seniorplc.com.
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 as they service similar markets
and customers in accordance with IFRS 8. The Flexonics Division is
managed as a single division.
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 30 30 30 30 30 30 30
June June June June June June June June
2017 2017 2017 2017 2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External
revenue 362.3 147.7 - 510.0 323.7 126.8 - 450.5
Inter-segment
revenue 0.4 0.1 (0.5) - 0.1 0.1 (0.2) -
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Total revenue 362.7 147.8 (0.5) 510.0 323.8 126.9 (0.2) 450.5
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted
trading profit 34.6 9.8 (7.2) 37.2 41.1 10.8 (4.9) 47.0
Share of
joint venture
profit - 0.3 - 0.3 - 0.2 - 0.2
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted
operating
profit 34.6 10.1 (7.2) 37.5 41.1 11.0 (4.9) 47.2
Profit on
sale of fixed
assets - - - - 0.1 - - 0.1
Amortisation
of intangible
assets from
acquisitions (4.3) (4.3) - (8.6) (5.6) (4.2) - (9.8)
Operating
profit 30.3 5.8 (7.2) 28.9 35.6 6.8 (4.9) 37.5
---------- ---------- ------------ ---------- ---------- ------------
Investment
income 0.1 0.1
Finance costs (5.0) (5.0)
---------- ----------
Profit before
tax 24.0 32.6
Tax (4.2) (6.1)
---------- ----------
Profit after
tax 19.8 26.5
---------- ----------
The provision of adjusted operating profit and adjusted trading
profit, derived in accordance with the table above, has been
disclosed to identify the performance of the Group prior to the
impact of amortisation of intangible assets from acquisitions and
for the half year ended 30 June 2016, profit on sale of fixed
assets. See Note 4 for further details.
Segment information for assets and liabilities is presented
below.
30 June 30 June 31 Dec
2017 2016 2016
Assets GBPm GBPm GBPm
Aerospace 425.1 405.1 422.2
Flexonics 150.9 144.1 146.2
Segment assets for reportable
segments 576.0 549.2 568.4
Unallocated
Central 4.1 4.5 3.8
Goodwill 309.9 305.8 318.8
Intangible assets from acquisitions 44.7 62.6 54.7
Cash 22.3 13.5 17.5
Deferred and current tax 6.7 10.4 7.3
Retirement benefit asset 10.0 - 4.0
Others 1.5 3.3 1.8
-------- -------- -------
Total assets per Balance Sheet 975.2 949.3 976.3
-------- -------- -------
30 June 30 June 31 Dec
2017 2016 2016
Liabilities GBPm GBPm GBPm
Aerospace 122.2 110.8 117.4
Flexonics 53.0 46.7 41.6
Segment liabilities for reportable
segments 175.2 157.5 159.0
Unallocated
Central 7.3 7.2 6.8
Debt 203.2 219.4 214.6
Finance leases 0.7 1.4 1.0
Deferred and current tax 76.0 72.8 76.7
Retirement benefit obligations 13.2 17.0 14.4
Others 1.7 2.3 3.3
-------- -------- -------
Total liabilities per Balance
Sheet 477.3 477.6 475.8
-------- -------- -------
4. Adjusted operating profit and adjusted profit before tax
The provision of adjusted operating profit and adjusted profit
before tax measures, derived in accordance with the table below,
has been disclosed to identify the performance of the Group prior
to the impact of amortisation of intangible assets from
acquisitions and for the half year ended 30 June 2016, profit on
sale of fixed assets.
Amortisation of intangible assets from acquisitions is a
non-cash charge that relates to prior acquisitions. It has been
excluded from the adjusted measures in order to show the underlying
current business performance of the Group in a consistent manner.
This also reflects how the business is managed on a day-to-day
basis.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Operating profit 28.9 37.5 65.8
---------- --- ---------- --------
Amortisation of intangible
assets from acquisitions 8.6 9.8 19.8
Profit on sale of fixed assets - (1) (0.1) -
---------- --- ---------- --------
Adjustments to operating profit 8.6 9.7 19.8
---------- --- ---------- --------
Adjusted operating profit 37.5 47.2 85.6
---------- --- ---------- --------
Profit before tax 24.0 32.6 55.5
Adjustments to profit before
tax as above 8.6 9.7 19.8
Adjusted profit before tax 32.6 42.3 75.3
---------- --- ---------- --------
(1) From 2017, the profit or loss on sale of fixed
assets is not considered an adjusting item.
5. Tax charge
Half-year Half-year
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Current tax:
Current year 6.7 3.3
Deferred tax:
Current year (2.5) 2.8
---------- ----------
4.2 6.1
---------- ----------
Corporation tax for the half-year ended 30 June 2017 is
calculated at 17.5% (H1 2016 - 18.7%) on profit before tax. On
adjusted profit before tax, an adjusted tax rate of 20% (H1 2016 -
20%) is charged, representing the 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
2017 2016
GBPm GBPm
Amounts recognised as distributions
to equity holders in the period:
Final dividend for the year ended
31 December 2016 of 4.62p (2015 -
4.36p) per share 19.4 18.3
---------- ----------
Interim dividend for the year ending
31 December 2017 of 2.05p (2016 -
1.95p) per share 8.6 8.1
---------- ----------
The interim dividend was approved by the Board of Directors on
28 July 2017 and has not been included as a liability in these
Interim Financial Statements, in accordance with the requirements
of IFRS.
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
2017 2016
Number of shares million million
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 418.9 418.8
Effect of dilutive potential ordinary
shares:
Share options 2.1 4.5
---------- ----------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 421.0 423.3
---------- ----------
Half-year Half-year Half-year Half-year
ended ended ended ended
30 June 30 June 30 June 30 June
2017 2017 2016 2016
Earnings EPS Earnings EPS
Earnings and earnings
per share ("EPS") GBPm pence GBPm pence
Profit for the period 19.8 4.73 26.5 6.33
Adjust:
Amortisation of intangible
assets from acquisitions
net of tax of GBP2.3m
(H1 2016 - GBP2.4m) 6.3 1.50 7.4 1.77
Profit on sale of fixed
assets net of tax of
GBPnil (H1 2016 - GBPnil) - - (0.1) (0.03)
Adjusted earnings after
tax 26.1 6.23 33.8 8.07
---------- ---------- ---------- ----------
Earnings per share
- basic 4.73p 6.33p
- diluted 4.70p 6.26p
- adjusted 6.23p 8.07p
- adjusted and diluted 6.20p 7.98p
The effect of dilutive shares on the earnings for the purposes
of diluted earnings per share is GBPnil (2016-GBPnil).
The denominators used for all basic, diluted and adjusted
earnings per share are as detailed in the table above.
The provision of adjusted earnings per share, derived in
accordance with the table above, has been disclosed to identify the
performance of the Group prior to the impact of amortisation of
intangible assets from acquisitions and for the half year ended 30
June 2016, profit on sale of fixed assets. See Note 4 for further
details.
8. Goodwill
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired.
The change in goodwill from GBP318.8m at 31 December 2016 (30
June 2016 - GBP305.8) to GBP309.9m at 30 June 2017 reflects a
decrease of GBP8.9m due to foreign exchange differences.
9. Investment in joint venture
During 2012, the Group set up and has a 49% interest in Senior
Flexonics Technologies (Wuhan) Limited, a jointly controlled entity
incorporated in China. The Group's investment of GBP2.0m (30 June
2016- GBP1.2m; 31 December 2016 GBP1.7m) represents the Group's
share of the joint venture's net assets as at 30 June 2017.
At the half year the Group had provided loans of GBP0.5m (30
June 2016- GBP1.3m; 31 December 2016 - GBP0.9m) to the joint
venture, GBPnil (30 June 2016- GBP1.0m; 31 December 2016 - GBPnil)
is reported as a current asset and GBP0.5m (30 June 2016- GBP0.3m;
31 December 2016- GBP0.9m) as a non-current asset.
During the half- year to 30 June 2017, GBP0.3m of the loans were
repaid (H1 2016 - GBPnil) after GBP0.1m of foreign exchange
differences.
10. Property, plant and equipment
During the period, the Group invested GBP19.4m (H1 2016 -
GBP21.9m) on the acquisition of property, plant and equipment. The
Group also disposed of machinery with a carrying value of GBP0.3m
(H1 2016 - GBP0.4m) for proceeds of GBP0.1m (H1 2016 -
GBP0.5m).
11. Retirement benefit schemes
Retirement benefit obligations of GBP13.2m (30 June 2016 -
GBP14.3m; 31 December 2016 - GBP14.4m) comprise the Group's US
defined benefit pension funded schemes with a total deficit of
GBP5.9m (30 June 2016 - GBP8.0m; 31 December 2016 - GBP7.4m) and
other unfunded schemes, with a deficit of GBP7.3m (30 June 2016 -
GBP6.3m; 31 December 2016 - GBP7.0m).
The retirement benefit asset of GBP10.0m (30 June 2016 - GBP2.7m
deficit; 31 December 2016 - GBP4.0m) comprises the Group's UK
defined benefit pension funded scheme.
The liability and asset values of the funded schemes have been
assessed by independent actuaries using current market values and
discount rates.
12. 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
2017 2016
GBPm GBPm
Operating profit 28.9 37.5
Adjustments for:
Depreciation of property, plant and
equipment 19.1 15.3
Amortisation of intangible assets 9.5 10.6
Loss/(profit) on sale of fixed assets 0.2 (0.1)
Costs on disposal of business - (0.2)
Share of joint venture (0.3) (0.2)
Share-based payment charges 0.9 0.4
Pension payments in excess of service
cost (4.7) (4.4)
Operating cash flows before movements
in working capital 53.6 58.9
Increase in inventories (6.5) (7.5)
Increase in receivables (13.7) (14.4)
Increase in payables and provisions 23.8 9.0
Working capital currency movements 0.8 (0.5)
Cash generated by operations 58.0 45.5
Income taxes paid (2.7) (1.4)
Interest paid (5.4) (4.6)
---------- ----------
Net cash from operating activities 49.9 39.5
---------- ----------
b) Free cash flow
Free cash flow, a non-statutory item, enhances the reporting of
the cash-generating ability of 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
2017 2016
GBPm GBPm
Net cash from operating activities 49.9 39.5
Interest received 0.2 0.1
Proceeds on disposal of property,
plant and equipment 0.1 0.5
Purchases of property, plant and equipment (19.4) (21.9)
Purchase of intangible assets (1.2) (0.9)
---------- ----------
Free cash flow 29.6 17.3
---------- ----------
c) Analysis of net debt
At At
1 January Exchange 30 June
2017 Cash flow movement 2017
GBPm GBPm GBPm GBPm
Cash 17.5 5.2 (0.4) 22.3
Overdrafts (0.7) 0.7 - -
---------- --------- --------- --------
Cash and cash equivalents 16.8 5.9 (0.4) 22.3
Debt due within
one year (44.2) 33.8 0.4 (10.0)
Debt due after
one year (169.7) (29.6) 6.1 (193.2)
Finance leases (1.0) 0.3 - (0.7)
Total (198.1) 10.4 6.1 (181.6)
---------- --------- --------- --------
Half-year Half-year
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Cash 22.3 13.5
Overdrafts - (2.9)
---------- ----------
Total 22.3 10.6
---------- ----------
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.
13. Assets held for sale
In November 2016, the Group entered into a sale agreement to
dispose of a property (land and building) in the Senior Flexonics
Bartlett operation, which is classified as held for sale and
presented separately in the Balance Sheet. The Group continues to
market the property despite the sale agreement not completing
during the period.
The major category of assets classified as held for sale is
property, plant and equipment of GBP4.0m (30 June 2016 - GBPnil; 31
December 2016 - GBP4.2m). The movement in the balance during 2017
relates to foreign exchange differences.
14. Provisions
Current and non-current provisions include warranty costs of
GBP1.8m (30 June 2016 - GBP1.8m; 31 December 2016 - GBP2.5m),
restructuring costs of GBP1.6m (30 June 2016 and 31 December 2016 -
GBPnil) and other costs of GBP0.8m (30 June 2016 - GBPnil; 31
December 2016 - GBP1.1m).
Restructuring costs relate to the closure of the BWT Ilkeston
facility, which is planned to complete during the second half
2017.
15. Share capital
Share capital as at 30 June 2017 amounted to GBP41.9m (30 June
2016 - GBP41.9m, 31 December 2016 - GBP41.9m). No shares were
issued during the period.
16. Contingent Liabilities
Contingent liabilities exist in respect of guarantees provided
by the Group in the ordinary course of business for product
delivery, performance and reliability. Various Group undertakings
are parties to legal actions or claims which arise in the ordinary
course of business, some of which could be for substantial amounts.
In May 2015, Senior Aerospace Ketema was named as co-defendant in a
putative class action lawsuit and a related lawsuit alleging
property damage filed against Ametek, Inc. in the USA. On January
25, 2017 and March 27, 2017, Senior Aerospace Ketema was named as a
co-defendant in similar lawsuits filed by additional plaintiffs.
Each of the lawsuits claim that Ametek had polluted the groundwater
during its tenure as owners of the site where Senior Aerospace
Ketema is currently located, allegedly causing harm to neighbouring
properties and/or creating health risks. While the outcome of some
of these matters cannot precisely be foreseen, the Directors do not
expect any of these arrangements, legal actions or claims, after
allowing for provisions already made, to result in significant loss
to the Group.
17. Financial Instruments
Categories of financial instruments
Half-year Half-year
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Carrying value of financial assets:
Cash and cash equivalents 22.3 13.5
Trade receivables 146.8 150.9
Other receivables 1.9 2.5
Loans and receivables at amortised
cost 171.0 166.9
---------- ----------
Currency derivatives used for hedging 1.9 2.1
Total financial assets 172.9 169.0
---------- ----------
Carrying value of financial liabilities:
Bank overdrafts and loans 203.2 219.4
Obligations under finance leases 0.7 1.4
Trade payables 108.9 91.7
Other payables 53.2 60.4
Financial liabilities at amortised
cost 366.0 372.9
---------- ----------
Currency derivatives used for hedging 9.5 10.2
Total financial liabilities 375.5 383.1
---------- ----------
Half-year Half-year
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Undiscounted contractual maturity of
financial liabilities at amortised
cost:
Amounts payable:
On demand or within one year 180.2 227.0
In the second to fifth years inclusive 123.0 113.3
After five years 94.3 68.0
---------- ----------
397.5 408.3
Less: future finance charges (31.5) (35.4)
---------- ----------
Financial liabilities at amortised
cost 366.0 372.9
---------- ----------
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 GBP209.0m (30 June 2016 - GBP232.1m). 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
2017 2016
GBPm GBPm
Assets:
Foreign exchange contracts - cash
flow hedges 1.9 2.1
---------- ----------
Total assets 1.9 2.1
---------- ----------
Liabilities:
Foreign exchange contracts - cash
flow hedges 9.5 10.2
Total liabilities 9.5 10.2
---------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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