Interim Results
SENIOR PLC
2 September 1999
INTERIM RESULTS
for the half-year ended 30 June 1999
HIGHLIGHTS
* Sales from continuing operations up 11.4% to £225.4m (1998 - £202.4m).
* Operating profits from continuing operations, pre relocation costs, up
12.3% to £23.7m (1998 - £21.1m).
* Pre-tax profit (before goodwill adjustments, relocation costs and
exceptionals) of £20.7m (1998 - £24.4m).
* Sale of the Heat Treatment and Precision Tube businesses for £56m.
* Flexonics acquisitions costing £11.0m (plus a further £25.4m since 30 June).
* Balance Sheet strength maintained (interest cover of over 7 times).
* Interim dividend increased by 4.0% to 1.84p per share.
Commenting on the results, Dr Alan Watkins, Chairman of SENIOR PLC said:
'This has been a pivotal six months for Senior. The strategic repositioning
is now largely complete and we are well placed to make further acquisitions in
our Flexonics businesses. While we continue to see competitive and demanding
markets for all of our products, we remain convinced that our strategy of
focusing on Flexonics and, in particular, on higher margin, high value added
products, will continue to ensure the future profitable growth of the Group'.
For further information, please contact:
SENIOR PLC
Dr AK Watkins, Chairman 01923 775547
AR Parrish, Group Chief Executive
TB Garthwaite, Group Finance Director
Finsbury Limited
James Murgatroyd 0171 251 3801
Morgan Bone
Internet users will be able to view this announcement, together with other
information about SENIOR PLC, on the web site www.seniorplc.com
Note to Editors
SENIOR PLC is an international engineering group with a market capitalisation
of approximately £400 million. It is the clear global leader in the design,
manufacture and marketing of thin-walled flexible tubing and related high
technology products, servicing the Aerospace (including Space), Automotive and
Specialised Industrial markets.
INTERIM STATEMENT 1999
Overview
The six months to 30 June 1999 have seen significant and beneficial change for
the Group, during a period in which the economic climate was more difficult
than envisaged at the beginning of the year. The Group's increasing focus on
Flexonics was emphasised by the sale of the non-core Heat Treatment and
Precision Tube businesses for an aggregate of £56m in May. These disposals
substantially reduced the Group's exposure to a weakening UK market. The
funds raised from the disposals are being invested in developing our global
Flexonics business which continues to be the core focus of the Group.
In the first six months of 1999, we purchased Willcox, a composite hose
manufacturer operating in the USA, UK and Holland, and took a 20% stake in
Techno Flex Co. Ltd., a metal hose manufacturer based in Japan, at a
combined cost of £11.0m. Since the half-year the Group has invested a further
£25.4m in the acquisitions of Pathway Bellows Inc. in the USA, world leader in
flexible expansion joints, and Hydro-Flex Inc. in Canada. These acquisitions
underpin the Group's stated strategy of developing Flexonics' strategic
positions in key global markets.
Financial Highlights
Sales from continuing operations were up 11.4% to £225.4m (1998 - £202.4m) and
operating profits from continuing operations before relocation costs increased
by 12.3% to £23.7m (1998 - £21.1m). Group operating margin has increased
again to 10.5% (1998 - 10.4%). As has been previously announced, the Group
has provided £5.6m of relocation costs, £4.0m in respect of losses on disposal
and £33.9m in respect of goodwill write-off from our non Flexonics businesses.
These charges have been fully accounted for in the first six months. After
these one-off costs, detailed above, the Group is reporting a loss before tax
of £24.2m (1998 - profit £24.3m).
Since the relocation costs will be borne in the UK and Germany, where the
Group already has tax losses, there will be a temporary increase in tax charge
to 35% (1998 - 28%) resulting in a loss per share of 9.63p (1998 - earnings
per share of 5.75p). The underlying earnings per share (excluding goodwill
write- offs, one-off relocation costs and exceptionals) is 3.21p (1998 -
5.77p) per share.
The Board has declared an interim dividend of 1.84p per share, up 4.0%, which
will be paid on 30 November 1999 to shareholders on the register at 5 November
1999.
Aerospace
Sales in the Aerospace Division, which currently represents 30.6% of
Flexonics, were up by 36.9% to £69.0m (1998 - £50.4m). These figures have
been boosted by the acquisition of Jet Products, California, in November 1998,
where margins have been ahead of expectations. Organic sales growth of 4.3%
was limited by various US customers' de-stocking programmes.
In addition to the impact of Jet Products, the major factory expansion
programme at Ketema has come on stream, on time and within budget, and
provides greatly enhanced production capability to an industry publicly and
increasingly anxious to consolidate its supplier base. Senior's recent
European successes, including being awarded the Trent 500 ducting by Rolls-
Royce, have increased the profile of Flexonics in Europe. Current order
schedules and an increasing order book give us confidence that, despite a
cyclically softening market, we will continue to show some progress in the
second half of 1999, though it will be 2000 and beyond before the growing
order book fully unwinds. Initial free deliveries under the increasing number
of long-term contracts will tend to dilute margins during 1999.
Automotive
In mixed market conditions the Automotive Division, representing 33.9% of
Flexonics' sales, reported a healthy 9.8% increase in sales to £76.5m (1998 -
£69.7m). Organic growth contributed 4.9% of this increase, marking a welcome
return to growth following a flat first half in 1998 and this has been
achieved against the background of the continuing price pressures inherent in
the industry.
The US market has been particularly robust. Passenger car sales continue to
run at record levels and Flexonics' initial penetration of the faster growing
Sports Utility Vehicle market offers real and significant opportunities for
the Group. In Europe demand, by contrast, remains generally flat. The
consolidation of our two UK manufacturing sites into one will reduce the
Group's cost base in the second half.
The Asian market is showing signs of recovery. The Group's opportunities in
this region, representing some 20% of global automotive volumes, have been
enhanced by the investment in Techno Flex, Japan, which has well-established
low-cost operations in China and Vietnam, and by the imminent opening of our
new Japanese staffed sales office in Tokyo.
Specialised Industrial
Specialised Industrial (representing 35.5% of Flexonics' sales) recorded sales
of £79.9m (1998 - £82.3m). Despite substantial progress made on new product
launches, reduction in customer demand and associated pricing pressures
(notably in Europe) have impacted sales and profits.
Sales in Air Systems, now incorporated within Specialised Industrial, were
£27.2m (1998 - £28.4m). Increasing and healthy demand in the UK commercial
construction market is expected to have a positive impact in the second half,
along with the reduction in cost base following previously announced
restructuring. In Germany, however, the market continues to be difficult and
highly competitive.
Cashflow and Capital Expenditure
The Group's cashflow for the period was largely neutral, leaving net debt at
£76.6m (December 1998 - £78.6m) which represents gearing under FRS 10 of
51.9%. The balance sheet remains strong with interest covered by more than
seven times.
Net capital expenditure totalled £21.5m (1998 - £12.0m) and was 2.3 times
depreciation. The strategy of out-investing our peers continues to provide
real rewards in terms of both increased levels of efficiency and technical
superiority. Working capital increased by £26.6m (1998 - £18.4m), largely due
to new contract starts in Aerospace. This is expected, as last year, to reduce
significantly during the second half.
Employees
Bill Kowal, formerly Division Director - Senior Flexonics North America, has
been appointed as the Chief Operating Officer, with Board responsibility for
the three newly established trading Divisions within Flexonics. Additionally
Tom Oakley has been recruited as Director - Senior Asia, reporting directly to
the Group Chief Executive, to manage the Group's growing interests in the
Asian market.
I would like to express my appreciation to all employees for their efforts
over the period, including those who worked so diligently in the businesses
which we have recently sold.
Year 2000
Given that the Group's products do not generally incorporate microchip
technology, the programme to address millennium issues is focused mainly on
managing the business risk associated with computer systems and manufacturing
equipment which might otherwise malfunction at the millennium.
The Group's objectives have now largely been met. Although it is impossible
to guarantee fault free performance under any circumstances, there are
currently no known issues which represent material risk to the Group.
The cost of achieving compliance has been absorbed into the general operating
costs of Group companies over the last six months.
Outlook
Having completed the disposal of the Heat Treatment and Precision Tube
businesses, the Group is actively progressing its ambitious acquisition
agenda, an integral component of our strategy for future profitable growth.
Underlying trading conditions in the Group's businesses remain challenging,
with continued strength in the US Automotive market and a rising Aerospace
order book, compensating in part for the short-term weakness in Aerospace
sales and margins and the current widespread softness in Specialised
Industrial. Overall, we believe that the increasing geographical spread and
product diversity offered by the Group will allow us the opportunity to make
progress next year.
Dr A K Watkins
Chairman
GROUP RESULTS
for the half-year ended 30 June 1999 (Unaudited)
Half-year Half-year Year
June 1999 June 1998 1998
Notes £m £m £m
--------- --------- ------
TURNOVER
Continuing operations 225.4 202.4 410.8
Discontinued operations 2 31.6 52.5 98.8
--------- --------- ------
1 257.0 254.9 509.6
========= ========= ======
OPERATING PROFIT BEFORE AMORTISATION
AND IMPAIRMENT OF GOODWILL
Continuing operations 23.7 21.1 47.1
Relocation costs 3 (5.6) - -
--------- --------- ------
18.1 21.1 47.1
Discontinued operations 2 (0.8) 3.9 5.0
--------- --------- ------
17.3 25.0 52.1
Amortisation of goodwill (1.3) (0.1) (1.1)
Impairment of goodwill 4 (12.8) - -
--------- --------- ------
OPERATING PROFIT 1 3.2 24.9 51.0
Share of associate's operating profit 0.1 - -
(Loss)/profit on sale of fixed assets in
continuing operations (0.1) - 0.9
Loss on disposal of discontinued operations
(including goodwill of £21.1m previously
written off to reserves) (25.1) - -
--------- --------- ------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
BEFORE INTEREST AND TAXATION (21.9) 24.9 51.9
Interest payable, net (2.3) (0.6) (2.4)
--------- --------- ------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION (24.2) 24.3 49.5
Tax on profit on
ordinary activities 5 (5.3) (6.8) (14.2)
--------- --------- ------
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION (29.5) 17.5 35.3
DIVIDENDS (5.6) (5.3) (14.3)
--------- --------- ------
(LOSS)/PROFIT FOR THE PERIOD (35.1) 12.2 21.0
========= ========= ======
(LOSS)/EARNINGS PER SHARE 6
Basic (9.63)p 5.75p 11.61p
Fully diluted (9.59)p 5.71p 11.54p
Underlying 3.21p 5.77p 11.75p
========= ========= ======
DIVIDENDS PER SHARE 1.84p 1.77p 4.69p
========= ========= ======
SUMMARISED GROUP BALANCE SHEET
as at 30 June 1999 (Unaudited)
30 June 30 June 31 Dec
1999 1998 1998
£m £m £m
--------- --------- ------
FIXED ASSETS
Intangible assets - goodwill 48.3 11.1 53.1
Tangible assets 97.2 102.5 125.3
Investments 7.7 - 0.6
--------- --------- ------
153.2 113.6 179.0
--------- --------- ------
NET CURRENT ASSETS
Stocks 71.7 69.7 75.6
Debtors 105.3 123.5 115.7
Creditors including deferred tax (105.9) (111.5) (139.2)
--------- --------- ------
71.1 81.7 52.1
--------- --------- ------
NET BORROWINGS (76.6) (52.7) (78.6)
--------- --------- ------
NET ASSETS 147.7 142.6 152.5
========= ========= ======
CAPITAL AND RESERVES
Called-up share capital 30.7 30.5 30.7
Share premium 3.2 0.9 3.1
Other reserves 17.7 19.2 19.2
Profit and loss account 96.0 91.2 99.3
--------- --------- ------
SHAREHOLDERS' FUNDS 147.6 141.8 152.3
Minority interests - equity 0.1 0.8 0.2
--------- --------- ------
TOTAL CAPITAL EMPLOYED 147.7 142.6 152.5
========= ========= ======
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the half-year ended 30 June 1999 (Unaudited)
Half-year Half-year Year
June 1999 June 1998 1998
£m £m £m
--------- --------- ------
At beginning of period 152.3 130.8 130.8
(Loss)/profit for the period (29.5) 17.5 35.3
Dividends (5.6) (5.3) (14.3)
Arising on share issues 0.1 0.1 2.5
Goodwill previously written off 33.9 - -
Currency variations (3.6) (1.3) (2.0)
--------- --------- ------
At end of period 147.6 141.8 152.3
========= ========= ======
SUMMARISED GROUP CASH FLOW STATEMENT
for the half-year ended 30 June 1999 (Unaudited)
Half-year Half-year Year
June 1999 June 1998 1998
£m £m £m
--------- --------- ------
GROUP OPERATING PROFIT 3.2 24.9 51.0
Depreciation of tangible fixed assets 9.2 7.9 15.8
Amortisation of goodwill 1.3 0.1 1.1
Impairment of goodwill 12.8 - -
(Increase)/decrease in working capital (26.6) (18.4) 7.3
--------- --------- ------
NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES (0.1) 14.5 75.2
Interest paid, net (1.8) (0.4) (2.2)
Dividends paid (8.9) (8.0) (13.4)
Tax paid (8.1) (7.7) (14.4)
--------- --------- ------
NET CASH (OUTFLOW)/ INFLOW BEFORE INVESTING
AND FINANCING ACTIVITIES (18.9) (1.6) 45.2
Purchase of tangible fixed assets (23.4) (12.3) (37.5)
Sale of property, plant and equipment 1.9 0.3 2.4
Own shares purchased by Employee Benefit Trust (0.6) - (1.0)
Acquisition of businesses (11.0) (20.0) (67.5)
Disposal of businesses 56.2 - -
Proceeds from share issues, net 0.1 0.1 0.1
Currency variations on net borrowings (2.3) 0.1 (1.0)
--------- --------- ------
DECREASE/(INCREASE) IN NET DEBT 2.0 (33.4) (59.3)
NET DEBT AT BEGINNING OF PERIOD (78.6) (19.3) (19.3)
--------- --------- ------
NET DEBT AT END OF PERIOD (76.6) (52.7) (78.6)
========= ========= ======
NOTES TO THE ACCOUNTS
for the half-year ended 30 June 1999 (Unaudited)
1. Turnover and operating profit by geographical market
Turnover by origin Operating profit by origin
Half-year Half-year Year Half-year Half-year Year
June 1999 June 1998 1998 June 1999 June 1998 1998
£m £m £m £m £m £m
------- ------- ----- ------- ------- -----
United Kingdom 38.6 43.4 85.4 1.7 4.1 8.4
Rest of Europe 44.2 44.8 91.6 (1.0) 1.5 3.5
North America 137.1 111.4 225.6 23.3 15.8 35.4
Rest of World 7.9 4.8 12.0 (0.3) (0.3) (0.2)
------- ------- ----- ------- ------- -----
Total 227.8 204.4 414.6 23.7 21.1 47.1
Inter-segment sales (2.4) (2.0) (3.8) - - -
Relocation costs - - - (5.6) - -
------- ------- ----- ------- ------- -----
Total continuing
operations 225.4 202.4 410.8 18.1 21.1 47.1
Discontinued operations 31.6 52.5 98.8 (0.8) 3.9 5.0
------- ------- ----- ------- ------- -----
257.0 254.9 509.6 17.3 25.0 52.1
Amortisation of goodwill - - - (1.3) (0.1) (1.1)
Impairment of goodwill - - - (12.8) - -
------- ------- ----- ------- ------- -----
257.0 254.9 509.6 3.2 24.9 51.0
======= ======= ===== ======= ======= =====
2. Discontinued operations reflect the turnover and operating results of the
Heat Treatment and Precision Tube businesses sold in May 1999.
3. Relocation costs comprise several plant rationalisation programmes
including those arising from recent small acquisitions.
4. The impairment of goodwill charge arises from a review under FRS 11 of
the value of the German Air Systems businesses and represents the
original purchased goodwill previously written off direct to reserves.
5. Tax on profit on ordinary activities for the half-year to 30 June 1999
has been charged at 35%, being the estimated rate applicable for the
year ended 31 December 1999 (1998 actual - 28%).
6. Earnings per share have been calculated on the weighted average number of
shares in issue and ranking for dividend during the period of 306.0m
(1998 half-year - 304.8m; 1998 year - 304.3m). Underlying earnings per
share has been included to identify the performance of the Group before
amortisation and impairment of goodwill and exceptional items.
7. The interim accounts have been prepared using the accounting policies set
out in the Group's 1998 Annual Accounts.
8. The results for the year ended 31 December 1998 are an abridged version
of the Group's full accounts for that year which received an
unqualified auditors' report and which have been filed with the
Registrar of Companies.
Tuesday, 14th May 2024
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