Half Year Results

RNS Number : 2831R

TT electronics PLC

19 August 2010

 



TTG.L

19 August 2010

TT ELECTRONICS PLC

Half Year Report for the six months ended 30 June 2010

TT electronics, a world leader in sensor and electronic component technology, announces its results for the six months to 30 June 2010.

Positioned for Sustainable Growth

KEY POINTS

·      Revenue from continuing operations increased by 23% to £280.7 million compared with £227.6 million in a weak first half of 2009.  Excluding the impact of foreign exchange and business closures in 2009, revenue increased by 27%

·      Profit before tax and exceptional items was £9.3 million (2009: loss of £3.8 million) with headline earnings per share of 4.0 pence (2009: loss of 3.0 pence)

·      Profit before tax was £13.8 million (2009: loss of £14.4 million)

·      Disposal of four businesses from the General Industrial division completed with net proceeds of £6.5 million

·      Net debt reduced to £44.6 million (December 2009: £56.9 million) with a new committed £70 million club facility to May 2013 and total available facilities of more than £110 million

·      Dividend payments resumed with an interim dividend of 0.8 pence per share (2009: nil)

·      Continuing improvements in customer focus, product innovation and manufacturing to sustain growth over the medium and long term

·      Overall trading for the full year ahead of the Board's previous expectations

Geraint Anderson, Group Chief Executive, said today:

"The Group's recovery has entered a new phase.  With the majority of restructuring complete we are focused on the continued delivery of operational improvements in customer focus, product innovation and manufacturing to sustain growth over the medium and long term.    

The increase in the Group's revenue and the benefits of the restructuring implemented over the last 18 months have improved operating margins which, together with the continued reduction in the Group's net debt, mean that we are able to resume payment of a dividend.

The sales momentum that started in the final quarter of 2009 in the majority of our markets has continued in the first half of 2010.  The outlook for the second half of the year is positive although some uncertainty remains, particularly around macro economic conditions.  The fundamental dynamics of our end markets remain attractive and I am pleased with the progress being made in implementing the Group's strategy."

Enquiries:

TT electronics plc                                            Tel:  [phone]

Geraint Anderson, Group Chief Executive

Shatish Dasani, Group Finance Director

Biddicks                                                           Tel:  [phone]

Zoë Biddick

This announcement, together with other information on TT electronics plc, may be found at:  www.ttelectronics.com

Highlights

£million	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 December 2009
Continuing operations
Revenue	280.7	227.6	480.1
Operating profit 1	11.3	(0.5)	6.5
Profit before taxation 1	9.3	(3.8)	0.8
Headline earnings per share 1	4.0p	(3.0)p	(1.2)p
Dividend per share	0.8p	-	-
Operating cash flow after capital expenditure 1, 2	12.2	19.9	67.6

¹        The above are reported before exceptional items
²        From continuing and discontinued operations

Chairman's statement

In the first half of 2010, revenue from continuing operations was £280.7 million and profit before exceptional items and taxation was £9.3 million compared with revenue of £227.6 million and a loss of £3.8 million for the same period in 2009.  Headline earnings per share was 4.0 pence compared to a loss per share of 3.0 pence in 2009.

In line with the Group's policy to increase dividends progressively whilst maintaining cover of at least two times underlying earnings per share, and taking into account the significant improvement in performance and the net debt position, the Board is pleased to resume the payment of dividends with an interim dividend of 0.8 pence per share payable in October 2010.  No interim or final dividend was paid in 2009.

Following difficult trading conditions throughout most of 2009, our markets improved in the final quarter of the year and this improvement continued in the first half of 2010.  We have seen good growth in revenue in our Components, Sensors, Secure Power and IMS divisions resulting from the actions we have taken to focus the Group on markets which we believe will provide opportunities for higher growth and margins, as well as a general recovery in demand.  This increase in volumes, together with the benefits of the restructuring actions taken in the last 18 months, have resulted in a significant improvement in operating profit in the first half of 2010. 

The Group's net indebtedness at 30 June 2010 was £44.6 million, compared with £100.0 million at 30 June 2009 and £56.9 million at 31 December 2009.  The Group has continued to reduce its indebtedness by carefully managing capital expenditure and working capital, whilst disposing of non-core businesses.

As previously announced, the Group appointed KPMG Audit Plc as auditors following a competitive tender.  The Board is appreciative of the service provided by Grant Thornton UK LLP over many years.

In the first half of the year, good progress was made in implementing the Group's strategy.  With the majority of restructuring completed, the emphasis is now on the delivery of operational excellence in the areas of customer focus, product innovation and manufacturing to create a strong platform for sustainable growth over the medium and long term.  A global management structure has been implemented in the Sensors division to enable the business to serve its major customers better across key regions and identify and pursue additional growth opportunities.  We have continued to invest in people, identifying and developing individuals within the organisation as well as bringing in new talent where necessary.

Overall, our markets continue to show a broad based recovery compared with the same period in 2009 providing increased visibility for the second half of the year.  However there is still uncertainty, particularly around macro economic conditions and the general economic recovery.

Against this background the Board's expectations of trading for the full year have increased.

I became Chairman following the retirement of John Newman on 12 May 2010.  Since my appointment, I have visited many of our businesses and am excited about the tremendous potential of our technologies, our customer relationships and our employees.  I am confident that the good progress we have made against our strategy and the actions that are underway position the Group well to develop further and to improve performance.

Sean Watson

Chairman

19 August 2010

Business review

TT electronics is a global electronics group supplying leading manufacturers in the defence, aerospace, medical, automotive and industrial electronics markets.  The Group comprises five divisions grouped into three strategic categories: Strategic Focus (Components and Sensors); Scalable Development (Secure Power and Integrated Manufacturing Services (IMS)); and Run for Value (General Industrial).

With the majority of the restructuring completed, the Group is creating a platform for long term sustainable growth.  We have continued to invest in developing the organisation with the appointment of a number of senior managers including a new Divisional Chief Executive for the Components division and a permanent Group HR director who joined the business in August 2010.  The roll-out of a new web-based performance management tool has been completed and it has been used to assess managers across the business, identify their development needs and set and track objectives.  Progress has also been made to improve operational excellence in customer focus, product innovation and manufacturing.  We continue to develop the key account management programme to improve the interface with our customers. A number of changes have been made to the organisation in the Components and Sensors divisions with the global sales teams ensuring better engagement with our major customers.  In addition, global operations directors have been appointed in both divisions to deliver continued improvements and efficiencies in manufacturing.  We continue to pursue the identified growth opportunities in both the Secure Power and IMS divisions.

Certain markets have been identified as good growth opportunities for the Group, including the defence and aerospace, medical and hybrid vehicle markets.  The virtual teams, created to bring together the Group's capabilities and ensure a co-ordinated approach to these markets, continue to make progress. The proportion of revenue from the medical market increased to 4.0% in the first half of the year (2009: 3.1%).  Progress in other markets means that the overall proportion of revenue from the defence and aerospace market decreased slightly to 11.5% (2009: 13.9%) although still growing in absolute terms.  The defence and aerospace market has been more stable than certain of the Group's other markets over the last 18 months.  A number of projects have been identified in the hybrid vehicle electronics market, although these are unlikely to deliver significant revenue until 2012 when mass production is expected to begin.

Within the General Industrial division, the relocation of AEI Compounds to a new facility and the transfer of further manufacturing from the WT Henley facility in the UK to the Group's site in China were completed in the first half of the year.  In addition, the sales of Wire Systems Technology (Pty) Limited, MMG India (Private) Limited, MMG Magdev Limited and MMG Canada Limited were completed.

Overview of Group performance

Continuing operations £million		Six months ended 30 June 2010		Six months ended 30 June 2009		Year ended 31 December 2009
Revenue
Components		112.9		93.9		190.8
Sensors		68.5		46.8		105.4
Integrated Manufacturing Services		42.7		38.5		75.1
Secure Power		38.0		26.4		59.1
General Industrial		18.6		22.0		49.7
		280.7		227.6		480.1

Operating profit 1 Components		5.2		2.4		5.9
Sensors		1.1		(4.3)		(3.9)
Integrated Manufacturing Services		1.8		1.5		2.4
Secure Power		2.5		2.0		4.8
General Industrial		0.7		(2.1)		(2.7)
		11.3		(0.5)		6.5

¹    Throughout this review operating profit is stated before exceptional items

Revenue increased by 23% in the half year to £280.7 million (2009: £227.6 million).  However, this was affected by foreign exchange movements and the closure of the AB Automotive business during 2009.  Excluding these items, the underlying increase was 27%.  On the same basis, revenue increased by 17% in the first half of 2010 compared to the second half of 2009.  Revenue in the Components division increased by 22% on an underlying basis compared to the same period last year with good growth across the majority of the division.  Revenue in the Sensors division increased by 50% on an underlying basis due to the sharp recovery in automotive demand from the very low levels seen in the first half of 2009.  The IMS division delivered a more modest improvement with revenues increasing by 12%.  Revenue in the Secure Power division increased by 38% on an underlying basis with growth coming from Ottomotores in Mexico as a result of new business won in Latin America.  Excluding revenue attributable to AB Automotive, revenue in the General Industrial division increased by 12% on an underlying basis over the same period last year. 

Operating profit before exceptional items from continuing operations improved from an operating loss of £0.5 million in the first half of 2009 to an operating profit of £11.3m in the first half of 2010.  This resulted from an increase in volumes in all divisions and the benefits of the restructuring undertaken over the preceding 18 months, partially offset by certain increases in the cost base. 

As previously announced, it was estimated that costs would be reduced by £31.3 million on an annualised basis as a result of the measures taken.  With most of the restructuring now complete, we can confirm that this target was achieved on an annualised basis at the end of the first half.

The adverse effect of currency translation on revenue and operating profit was £2.0 million and £0.1 million respectively due to the movement of sterling against major currencies (based on average first half rates for 2010 and 2009).

Components

£million		Six months ended 30 June 2010		Six months ended 30 June 2009		Year ended 31 December 2009
Revenue		112.9		93.9		190.8
Operating profit		5.2		2.4		5.9
Operating profit margin		4.6%		2.6%		3.1%

The focus of the Components division is to deliver highly engineered components, including products which are custom designed for specific applications by the division's global network of applications engineers. 

Underlying revenue increased by 22% (after adjusting for foreign exchange movements) reflecting improving demand from customers across all end markets.  The rapid rebound in demand for electronic components in late 2009 has continued in the first half of 2010 and there is evidence that global supply chains are struggling to meet the increase in demand.  Our continued focus on operational excellence, together with close management of key suppliers, is enabling us to better support our key electronic component customers and win new business.  As anticipated, there has been a lower increase in revenue from our connector businesses where the majority of sales are into the UK and US military markets which have been more stable than other markets over the last 18 months.  The overall increase in volumes, coupled with the cost reduction actions taken in the last two years, resulted in an increase in the operating margin to 4.6% (2009: 2.6%).

As reported in the 2009 Annual Report, the decision was taken in 2009 to close the manufacturing facility in Glenrothes, Scotland with certain products being moved to the Group's facility in Newcastle.  The timetable for closure has been adjusted in response to the up-turn in market demand and the transfer is now planned to be completed by the end of the year.

The unified sales structures in Europe, USA and Asia, together with the key account management programme covering 14 of the Group's top accounts, continue to contribute to the development of higher level partnerships with our customers, positioning the division well to win future new business.  A global operations director has been appointed for the core electronic components businesses to deliver further improvements and efficiencies in the manufacturing organisation.

Sensors

£million		Six months ended 30 June 2010		Six months ended 30 June 2009		Year ended 31 December 2009
Revenue		68.5		46.8		105.4
Operating profit		1.1		(4.3)		(3.9)
Operating profit margin		1.6%		(9.2)%		(3.7)%

The Sensors division provides highly engineered sensor solutions for critical applications in the automotive, broader transportation and industrial markets globally.

Underlying revenue for the period, excluding the effect of foreign exchange, increased by 50% relative to a weak first half in 2009.  The improvement in revenue was primarily attributable to a strong recovery in automotive end markets following the significant downturn in late 2008 and 2009 and a re-stocking of the supply chain.  The increase in volumes, together with the restructuring actions taken in Germany and the UK in 2009, resulted in an operating profit of £1.1 million for the first half of 2010 compared to an operating loss of £4.3 million for the same period in 2009.

A global management structure was implemented in the first half of the year to enable the business to better track and serve its major customers across key regions and to identify and pursue additional growth opportunities.  We are beginning to see benefits from this in the way we interact with key customers and the new structure is also supporting our growing operations in new markets, particularly in India and China. 

Integrated Manufacturing Services

£million		Six months ended 30 June 2010		Six months ended 30 June 2009		Year ended 31 December 2009
Revenue		42.7		38.5		75.1
Operating profit		1.8		1.5		2.4
Operating profit margin		4.2%		3.9%		3.2%

With manufacturing in the UK, USA, China and Malaysia, the division provides high quality electronic manufacturing support for customers in the defence and aerospace, telecom and premium industrial sectors.

Underlying revenue for the period, excluding the effect of foreign exchange, increased by 12% compared with the same period in 2009, with China and the USA performing well.  The division, which was slower to feel the impact of the global downturn, has experienced a more muted recovery in its end markets than the Components and Sensors divisions.  In the first half of the year, performance was affected by component shortages and there has been a significant effort to ensure on-time delivery to retain customers and secure new business.  In the UK, the Aylesbury plant was closed as planned in the first half of the year and the transfer of business to the Rogerstone facility completed.  Operating margins improved in the period to 4.2% (2009: 3.9%).

The businesses continue to target customers who require specialised integrated assembly and who value the division's global footprint.  The global sales structure introduced in 2009, and progress in the key account management programme, have resulted in a number of new customer wins in the period which are expected to deliver significant additional revenue over the next two years.

Secure Power

£million		Six months ended 30 June 2010		Six months ended 30 June 2009		Year ended 31 December 2009
Revenue		38.0		26.4		59.1
Operating profit		2.5		2.0		4.8
Operating profit margin		6.6%		7.6%		8.1%

The division provides secure power solutions including generating sets, uninterruptible power supplies and service and support for customers' critical power needs in selected markets worldwide.

Revenue increased by 38% on an underlying basis compared with the first half of 2009 principally as a result of an improved performance by Ottomotores in Mexico with increased domestic sales supplemented by a number of projects secured in Latin America.  Dale Power Solutions in the UK had a difficult start to the year with fewer large UK projects completed compared with the first half of 2009 which included the delivery of secure power systems to several UK hospitals.  The UK order book has improved significantly in recent months and we expect to see a better performance in the second half of the year.  Overall, the operating profit margin for the division reduced to 6.6% (2009: 7.6%) as a result of a number of factors including continued investment to develop the sales and service office in Brazil, pricing pressure and unfavourable product mix in the UK, and a foreign exchange loss in Mexico (compared with a gain in the first half of 2009).

The division continues to develop new markets, particularly in the Middle East and in Latin America.  The office in Brazil is making progress and a number of major orders were secured in the first half of the year in Brazil, Columbia and Venezuela.  In the UK the office in Aberdeen, opened in 2009, secured a second major multi-year contract to provide service and support to the offshore oil and gas industry.

General Industrial

£million		Six months ended 30 June 2010		Six months ended 30 June 2009		Year ended 31 December 2009
Revenue		18.6		22.0		49.7
Operating profit		0.7		(2.1)		(2.7)
Operating profit margin		3.8%		(9.5)%		(5.4)%

With operations in the UK, China and the USA the division serves a range of market sectors with applications including electrical fusegear, specialist compounds for the cable and pipe market and fastenings for the industrial and automotive sectors.

The AB Automotive climate control business was closed during 2009.  The business made a loss of £2.2 million on revenue of £5.4 million in the first half of 2009 and a loss of £2.9 million on revenue of £16.0 million for the full year.

Revenue from continuing businesses increased by 12% on an underlying basis (before the impact of foreign exchange and excluding revenue in 2009 attributable to the AB Automotive business) compared with the same period in 2009, with an increase in operating profit to £0.7 million.

We have implemented the plans set in 2009 with the relocation of AEI Compounds to a new facility and the transfer of further manufacturing from the WT Henley facility in the UK to the Group's site in China completed in the first half of the year.  In addition, the sales of Wire Systems Technology (Pty) Limited, MMG India (Private) Limited, MMG Magdev Limited and MMG Canada Limited were completed successfully.

Measuring our performance

The Group has a clear strategy to improve performance and deliver shareholder value.  Key Performance Indicators were identified in the 2009 Annual Report to monitor progress.  Organic revenue growth for continuing operations in the first half of the year compared to the same period in 2009 (excluding the effect of currency movements and the closure of the AB Automotive business during 2009) was 27% against the target of mid to high single digit growth.  The improvement in the operating margin in the first half of the year to 4.0% represents progress towards the goal for the Group of 8-10% in the medium term.  Similarly, in the first half of the year the Components, Sensors and IMS divisions all made progress towards their respective operating margin targets.  The operating margins in the Secure Power division decreased in the period as a result of the more difficult market conditions in the UK, a foreign exchange loss in Mexico and investments made to develop the business in Latin America. 

Operating cash conversion, earnings per share growth and relative total shareholder return all exceeded the targets set for the Group.

Exceptional items

An exceptional credit of £4.5 million from continuing operations has been recognised during the half year, compared with an exceptional restructuring charge of £10.6 million for the comparative half year period. This is shown below:

£million				Six months ended 30 June 2010		Six months ended 30 June 2009
Pension curtailment gain from scheme closure				4.3		-
Profit on sale of property interest				1.0		-
Onerous property leases				(0.8)		-
Restructuring costs				-		(10.6)
Total				4.5		(10.6)

The pension curtailment gain arises from the closure of the UK defined benefit scheme to future accrual as discussed further below. The Group has received £1.0 million in exchange for a reduction in its participation of future profits from the development of the Gravesend site sold in 2005.  The residual interest retained by the Group is not expected to result in a material benefit in the medium term.  A provision of £0.8 million has been made in respect of two non-trading properties which are subject to onerous long term leases.

Taxation

The tax charge for the period was £3.1 million (2009: £0.9 million), which represents an effective tax rate of 33% on continuing operations. The charge arises from the profits generated in overseas countries, in particular in USA, Mexico and China.  There is no tax payable in the UK or Germany due to the availability of tax losses.

Earnings per share and dividends

Headline earnings per share from continuing operations was 4.0 pence (2009: loss per share of 3.0 pence) for the period, whilst basic earnings per share from continuing operations were 6.9 pence (2009: loss per share of 9.9 pence).

The Directors have declared an interim dividend of 0.8 pence per share which is in line with the Group's dividend policy to increase dividends progressively whilst maintaining cover of at least two times underlying earnings per share.  This will be paid on 28 October 2010 to shareholders on the register on 15 October 2010.

Discontinued operations

During the six months ended 30 June 2010, the Group disposed of the following four businesses, all of which were part of the General Industrial division:

·        MMG Canada Limited;

·        Wire Systems Technology (Pty) Limited;

·        MMG Magdev Limited; and

·        MMG India (Private) Limited

Cash proceeds received during the period from the disposals amounted to £6.5 million with approximately a further £1.0 million expected to be received in the third quarter of 2010 based on closing net asset value adjustments that remain to be finalised.  There was a loss of £0.5 million in 2010 (2009: loss of £0.1 million) from the discontinued businesses.

These businesses are included within discontinued operations in the Condensed consolidated income statement and the 2009 comparatives have been re-presented accordingly.

Pensions

The Group operated one significant defined benefit scheme in the UK and two overseas defined benefit schemes in the USA and Japan. All of these schemes are closed to new members and, in April 2010, the UK scheme was closed to future accrual following extensive consultation; affected employees were transferred into an enhanced Group defined contribution scheme.  A one-off reduction in future liabilities of £4.3 million was recognised in the Condensed consolidated income statement as an exceptional item.

The assets and liabilities of the Group's defined benefit schemes are summarised below:

£million		At 30 June 2010	At 30 June 2009	At 31 December 2009
Fair value of assets		317.8	268.5	306.5
Liabilities		(361.4)	(301.7)	(350.2)
Deficit		(43.6)	(33.2)	(43.7)

A revised funding agreement was agreed with the Trustee of the UK scheme in January 2009, fixing deficit contributions until 2016. Under the agreement, a special contribution of £1.6 million was made into the scheme in March 2010, with a further £1.6 million due to be paid in the second half of 2010.

The triennial valuation of the UK defined benefit scheme as at April 2010 is in progress and the result is expected before the year end.

Cash flow, borrowings and facilities

Operating cash flow before exceptional payments for the period was £20.5 million compared with £28.4 million in the first half of 2009. As expected, the improved trading levels have absorbed additional working capital in the first half of 2010, following the significant reduction achieved in 2009, with working capital increasing by £6.1 million during the period. Conversion of operating profit to operating cash flow after capital expenditure was 108%, exceeding the target of 100% conversion.

Exceptional restructuring cash costs of £3.1 million were incurred in the first half, together with a £1.6 million special payment to the UK pension fund, resulting in cash generated from operations of £15.8 million (2009: £22.1 million).

Capital expenditure was £5.0 million compared with depreciation of £10.7 million. Proceeds from the disposal of fixed assets amounted to £1.3 million and proceeds from the disposal of businesses amounted to £6.5 million. Net cash flow for the half year was £11.4 million (2009: £7.2 million) and this, together with the favourable £0.9 million exchange variance, led to a £12.3 million reduction in net debt to £44.6 million (31 December 2009: £56.9 million).

In May 2010 the Group agreed a new committed facility of £70 million over three years to May 2013 with a club of four banks comprising HSBC, Royal Bank of Scotland, Santander and Fifth Third Bank of the USA. The new facility replaces an existing term loan which had been due for repayment in April 2011. The new facility and other bilateral term loans and working capital lines, give the Group adequate facilities of over £110 million for the foreseeable future and provide a comfortable level of headroom of approximately £65 million over net debt.

The main financial covenants in the new facility restrict net debt to be below 2.5 times EBITDA before exceptional items in the first year, and then 2 times EBITDA before exceptional items in the second and third years. In addition, EBITDA before exceptional items is required to cover net finance charges by 5.25 times in year one, 6.25 times in year two and 6.5 times in year three. The covenants are to be tested quarterly on a rolling 12 month basis.  The covenants were satisfied comfortably at 30 June 2010:

				Covenant		June 20101
Net debt/EBITDA before exceptional items				<2.5		0.9
EBITDA before exceptional items/net finance charges				>5.25		17.8

¹ based on EBITDA and net finance charges for 12 months ended 30 June 2010

The Directors have assessed the future funding requirements of the Group and compared them with the level of available borrowing facilities and are satisfied that the Group has adequate resources for the foreseeable future.

Principal risks and uncertainties

Operational risks

The Group directly and indirectly serves large automotive OEM customers. This exposes the Group to several risks including fluctuating manufacturing volumes, the potential for significant quality and recall claims and customer default. In the event that one of the larger automotive manufacturers or suppliers defaults or seeks protection from its creditors, the Group may not recover all of the amounts owed to it.

In addition, the Group is exposed to risks of product liability, credit risk, supply chain issues, reliance on customers' commitments and other usual commercial risks in all of its businesses. However, these risks are diversified as the Group has a wide portfolio of products and operates in a number of market sectors.

There are established procedures in place to manage such risks, including production quality control procedures and insurance with reliable insurers, which have been put in place taking into account the risk involved and the marketplace in which the exposure arises. In addition, major contracts are reviewed by the Group Legal Counsel.

The Group has contractual and other arrangements with numerous third parties in support of its business activities. This report does not contain information about any of these third parties as none of the arrangements with them are considered individually material in the context of the Group overall.

 

Financial risks

As an international business, the major financial risks faced by the Group are liquidity risk, currency risk and interest rate risk.  These are continuously monitored by Group management and regularly reviewed by the Board.

 

Liquidity

The Group has addressed a general uncertainty regarding the availability of bank financing by agreeing a new facility with a term of three years to May 2013 with a group of four banks.  In addition, forecast and actual cash flows are monitored on an ongoing basis to ensure that bank covenants and liquidity requirements will be met. The Group regularly discusses its requirements with its principal bankers and it is considered unlikely that the Group will face any significant funding issues in the foreseeable future.

 

Foreign currency

The Group's main foreign exchange exposures relate to the translation of profits and net assets denominated in overseas currencies into sterling and transactions in foreign currencies. The Group's policy is to use hedges to reduce these risks. These hedges are achieved through forward currency contracts and currency borrowings.

 

Interest cost

Interest cost risk is mitigated by the use of a combination of short and medium term debt at both fixed and floating rates and by the use of interest rate caps where appropriate.

 

Outlook

The Group saw an increase in demand across the majority of its end markets in the first half of the year which has been maintained in the second half to date.  Order levels remain strong for the Components division and the ongoing electronic component shortages being seen across many industries suggest that a re-stocking of the supply chain is not yet complete.  Within the Sensors division, which delivered a strong first half performance, it is expected that automotive volumes in Europe will reduce in the second half of the year due to the economic uncertainty and the end of government incentive schemes, offset to some degree by continued growth in Asia.  The IMS division continues to see a steady improvement in demand, particularly in China and the USA.  We expect the Secure Power division to benefit from the improved order book in the UK and continued progress in Latin America.

Overall, our markets continue to show a broad based recovery compared with the same period in 2009 providing increased visibility for the second half of the year.  The sales momentum which started in the final quarter of 2009 in the majority of our markets has continued in 2010 and the outlook for the second half is positive.  Although there is still uncertainty around macro economic conditions and the general economic recovery, the Board's expectations of trading for the full year have increased.

The fundamental dynamics of our end markets remain attractive.  The Board is pleased with the progress made in the first half and is confident that implementation of the Group's strategy will continue to improve performance.

Geraint Anderson                                                                           Shatish D Dasani

Group Chief Executive                                                                    Group Finance Director

19 August 2010                                                                                19 August 2010

 

Responsibility statement

 

We confirm that to the best of our knowledge

 

(a)        the condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU.

(b)        the interim management report includes a fair review of the information required by DTR 4.2.7R:

            (i)       an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and

            (ii)      a description of the principal risks and uncertainties for the remaining six months of the year.

(c)        the interim management report includes a fair review of the information required by DTR 4.2.8R:

            (i)       related parties transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group in that period, and

            (ii)      any changes in the related parties transactions described in the Annual Report 2009 that could have a material effect on the financial position or performance of the Group in the current period.

On behalf of the Board

Geraint Anderson                                                                           Shatish D Dasani

Group Chief Executive                                                                    Group Finance Director

19 August 2010                                                                                19 August 2010

Cautionary Statement

This announcement contains forward looking statements which are made in good faith based on the information available to the time of its approval.  It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ materially from those currently anticipated.

Independent review report

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-year report for the six months ended 30 June 2010 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 the related explanatory notes.  We have read the other information contained in the half-year 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 the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA").  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.

Directors' responsibilities

The half-year report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half-year report in accordance with the DTR of the UK FSA.

The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half year report has been prepared in accordance with IAS 34 'Interim Financial Reporting' 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-year 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 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.  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.

Whilst the Company has previously produced a half-year report containing a condensed set of financial statements, those financial statements have not previously been subject to a review report by an independent auditor. As a consequence, the review procedures set out above have not been performed in respect of the comparative period for the six months ended 30 June 2009.

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-year report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

A J Sykes

for and on behalf of KPMG Audit Plc
Chartered Accountants
8 Salisbury Square

London, EC4Y 8BB
19 August 2010

Condensed consolidated income statement (unaudited)

for the six months ended 30 June 2010

£million (unless otherwise stated)	Note	Six months ended 30 June 2010	Six months ended 30 June 2009*	Year ended 31 December 2009*
Continuing operations
Revenue	3 a,b	280.7	227.6	480.1
Cost of sales		(230.6)	(195.7)	(404.5)
Gross profit		50.1	31.9	75.6
Distribution costs		(18.5)	(16.7)	(32.0)
Administrative expenses		(17.2)	(16.3)	(38.3)
Other operating income		1.4	1.5	3.1
Other operating expenses		-	(11.5)	(19.9)
Operating profit/(loss)		15.8	(11.1)	(11.5)
Analysed as:
Operating profit/(loss) before exceptional items		11.3	(0.5)	6.5
Exceptional items	5	4.5	(10.6)	(18.0)
Finance income	6	9.6	8.0	15.8
Finance costs	6	(11.6)	(11.3)	(21.5)
Profit/(loss) before taxation		13.8	(14.4)	(17.2)
Taxation		(3.1)	(0.9)	(2.2)
Profit/(loss) from continuing operations		10.7	(15.3)	(19.4)
Discontinued operations
Loss for the period from discontinued operations	4	(0.5)	(0.1)	(0.2)
Profit/(loss) for the period		10.2	(15.4)	(19.6)
Attributable to:
Owners of the company		10.2	(15.4)	(19.6)
Non-controlling interests		-	-	-
Earnings/(loss) per share attributable to owners of the Company:	8
Basic and diluted		6.6p	(9.9)p	(12.6)p

*    re-presented for discontinued operations in accordance with IFRS

Condensed consolidated statement of comprehensive income (unaudited)

for the six months ended 30 June 2010

£million	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 December 2009
Profit/(loss) for the period	10.2	(15.4)	(19.6)
Other
Exchange differences on retranslation of foreign operations	4.3	(20.8)	(10.7)
Gains on cash flow hedges taken to equity less amounts taken to the income statement	0.6	1.6	2.1
Foreign exchange loss on disposals taken to the income statement	(1.6)	-	-
Change in fair value of minority put option (note 12)	(3.5)	-	-
Actuarial loss on defined benefit pension schemes	(5.9)	(15.8)	(28.7)
Deferred tax on pension deficit movement	-	4.2	-
Total comprehensive income/(expense) for the period	4.1	(46.2)	(56.9)

Condensed consolidated balance sheet (unaudited)

at 30 June 2010

£million	Note	At 30 June 2010	At 30 June 2009	At 31 December 2009
ASSETS
Non-current assets
Property, plant and equipment		100.7	115.5	111.3
Goodwill		69.4	67.6	65.9
Other intangible assets		15.2	19.5	17.6
Deferred tax assets		4.9	9.6	4.9
Total non-current assets		190.2	212.2	199.7
Current assets
Inventories		94.9	93.2	83.9
Trade and other receivables		98.5	91.3	85.1
Derivative financial instruments		1.3	-	0.3
Cash and cash equivalents		23.0	10.8	24.7
Total current assets		217.7	195.3	194.0
Total assets		407.9	407.5	393.7
LIABILITIES
Current liabilities
Borrowings		8.4	39.2	11.2
Derivative financial instruments		0.7	0.6	0.5
Trade and other payables		110.0	73.1	88.7
Income taxes payable		2.6	0.1	1.7
Provisions		8.5	7.9	8.9
Total current liabilities		130.2	120.9	111.0
Non-current liabilities
Borrowings		59.2	71.6	70.4
Deferred tax liability		5.6	8.5	5.9
Pensions and other post employment benefits	10	43.6	33.2	43.7
Provisions		0.3	0.1	0.2
Other non-current liabilities		9.1	6.6	6.7
Total non-current liabilities		117.8	120.0	126.9
Total liabilities		248.0	240.9	237.9
Net assets		159.9	166.6	155.8
EQUITY
Share capital		38.7	38.7	38.7
Share premium		0.2	0.2	0.2
Share options reserve		1.0	1.1	1.0
Hedging and translation reserve		30.5	16.6	27.2
Retained earnings		87.5	107.6	86.3
Equity attributable to owners of the Company		157.9	164.2	153.4
Non-controlling interests		2.0	2.4	2.4
Total equity		159.9	166.6	155.8

Condensed consolidated statement of changes in equity (unaudited)

for the six months ended 30 June 2010

		Attributable to owners of the Company
£million	Share capital		Share premium	Share options reserve	Hedging reserve	Translation reserve	Retained earnings	Total	Non- controlling interest	Total
At 1 January 2010	38.7		0.2	1.0	(11.5)	38.7	86.3	153.4	2.4	155.8
Profit for the period	-		-	-	-	-	10.2	10.2	-	10.2
Other comprehensive income
Exchange differences on retranslation of foreign operations	-		-	-	-	4.3	-	4.3	-	4.3
Gains on cash flow hedges taken to equity less amounts taken to the income statement	-		-	-	0.6	-	-	0.6	-	0.6
Foreign exchange loss on disposals taken to the income statement	-		-	-	-	(1.6)	-	(1.6)	-	(1.6)
Change in fair value of minority put option	-		-	-	-	-	(3.1)	(3.1)	(0.4)	(3.5)
Actuarial loss on defined benefit pension scheme	-		-	-	-	-	(5.9)	(5.9)	-	(5.9)
Deferred tax on pension deficit movement	-		-	-	-	-	-	-	-	-
Total other comprehensive income	-		-	-	0.6	2.7	(9.0)	(5.7)	(0.4)	(6.1)
Transactions with owners recorded directly in equity
Share based payments	-		-	-	-	-	-	-	-	-
At 30 June 2010	38.7		0.2	1.0	(10.9)	41.4	87.5	157.9	2.0	159.9
At 1 January 2009	38.7		0.2	1.2	(18.1)	53.9	134.6	210.5	2.4	212.9
Loss for the period	-		-	-	-	-	(15.4)	(15.4)	-	(15.4)
Other comprehensive income
Exchange differences on retranslation of foreign operations	-		-	-	4.5	(25.3)	-	(20.8)	-	(20.8)
Gains on cash flow hedges taken to equity less amounts taken to the income statement	-		-	-	1.6	-	-	1.6	-	1.6
Actuarial loss on defined benefit pension scheme	-		-	-	-	-	(15.8)	(15.8)	-	(15.8)
Deferred tax on pension deficit movement	-		-	-	-	-	4.2	4.2	-	4.2
Total other comprehensive income	-		-	-	6.1	(25.3)	(11.6)	(30.8)	-	(30.8)
Transactions with owners recorded directly in equity
Share based payments	-		-	(0.1)	-	-	-	(0.1)	-	(0.1)
At 30 June 2009	38.7		0.2	1.1	(12.0)	28.6	107.6	164.2	2.4	166.6

Condensed consolidated cash flow statement (unaudited)

for the six months ended 30 June 2010 

£million	Note	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 December 2009
Cash flows from operating activities
Operating profit/(loss) before exceptional items		11.3	(0.5)	6.5
Adjustments for:
Depreciation of property, plant and equipment		10.7	12.3	24.1
Amortisation of intangible assets		5.2	6.2	11.8
Other items		(0.6)	(2.7)	(5.7)
Movement in working capital		(6.1)	13.1	47.2
Operating cash flow before exceptional payments		20.5	28.4	83.9
Special payments to pension funds		(1.6)	-	(2.2)
Exceptional restructuring costs		(3.1)	(6.3)	(9.6)
Net cash generated from operations		15.8	22.1	72.1
Income taxes paid		(2.4)	(3.8)	(5.3)
Net cash from operating activities		13.4	18.3	66.8
Cash flows from investing activities
Purchase of property, plant and equipment		(5.0)	(4.8)	(9.4)
Proceeds from sale of property, plant and equipment and grants received		1.3	1.0	5.7
Development expenditure and purchase of patents and licences		(3.3)	(3.7)	(6.9)
Disposal of subsidiaries		6.5	-	-
Acquisition of subsidiaries		-	(1.0)	(1.0)
Net cash used in investing activities		(0.5)	(8.5)	(11.6)
Cash flows from financing activities
Interest paid		(1.4)	(2.6)	(3.8)
Repayment of borrowings	11	(75.3)	(8.1)	(17.6)
Proceeds from borrowings (net of arrangement costs of £2.0 million)	11	58.0	-	2.9
Finance leases		-	-	(0.1)
Net cash used in financing activities		(18.7)	(10.7)	(18.6)
Net (decrease)/increase in cash and cash equivalents	11	(5.8)	(0.9)	36.6
Cash and cash equivalents at beginning of period		24.5	(12.2)	(12.2)
Exchange differences		0.5	0.8	0.1
Cash and cash equivalents at end of period	11	19.2	(12.3)	24.5
Cash and cash equivalents comprise
Cash at bank and in hand		23.0	10.8	24.7
Bank overdrafts		(3.8)	(23.1)	(0.2)
	11	19.2	(12.3)	24.5

The Condensed consolidated cash flow statement includes cash flows from both continuing and discontinued operations.

Notes to the Condensed consolidated financial statements (unaudited)

1.   General information

      The Condensed consolidated financial statements for the six months ended 30 June 2010 are unaudited and were authorised for issue in accordance with a resolution of a sub-committee of the Board of Directors.  The comparative figures for the year ended 31 December 2009 are based on the company's statutory accounts for that financial year.  Those accounts have been reported on by the company's auditors and delivered to the registrar of companies.  The report of the auditors was unqualified, did not include a reference to any matter to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 or of the Companies Act 2006.

2.    Basis of preparation

a)    Condensed consolidated half-yearly financial statements

       These condensed consolidated half-yearly financial statements have been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the EU.  These condensed consolidated half-yearly financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the 2009 Annual Report and Accounts.

b)   Basis of accounting

       The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2009 except for the adoption of the following new accounting standards and interpretations:

·       IFRS2 'Share based payment - Group cash settled share based payment transactions (Amendment)'

·       IFRS3 'Business combinations (Revised)'

·       IAS39 'Financial instruments : recognition and measurement - eligible hedged items (Amendment)'

·       IFRIC17 'Distribution of non-cash assets to owners'

Adoption of these amendments, standards and interpretations did not have any impact on the financial position and performance of the Group.

c)   Discontinued operations

In accordance with IFRS5 'Non-current assets held for sale and discontinued operations', comparatives for prior periods have been re-presented for businesses treated as discontinued.

d)   Estimates

The preparation of half-year financial statements requires management to make judgements, estimates and assumptions which affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense.  Actual results may differ from these estimates.

In preparing the Condensed consolidated half-year financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent to those applied to the consolidated financial statements as at and for the year ended 31 December 2009.

3.   Segment information

       For management purposes, the Group is organised into five divisions, as shown below, according to the nature of the products and services provided. Each of these divisions represents an operating segment in accordance with IFRS 8 'Operating segments.' The operating segments are:

·      Components - specialist resistive components and microcircuits, connectors and interconnection systems;

·      Sensors - electronic accelerator pedals, engine and wheel speed, temperature and pressure sensors and chassis height sensors;

·      Integrated Manufacturing Services - the provision of global electronics manufacturing capability with logistics, interconnect and integrated solutions;

·      Secure Power - standby generation and uninterruptible power systems manufacture and service; and

·      General Industrial - manufacturing operations serving a range of market sectors with applications including electrical fusegear and compounding.

The key performance measure of the operating segments is operating profit before exceptional items. Exceptional items are those items which are non-recurring or variable in nature and which do not impact the underlying trading performance of the business.

The accounting policies adopted by each operating segment are consistent with those published in the 2009 Annual Report and Accounts.

a)    Income statement information - continuing operations

			Six months ended 30 June 2010
£million	Components	Sensors	Integrated Manufacturing Services	Secure Power	General Industrial	Total
Sales to external customers	112.9	68.5	42.7	38.0	18.6	280.7
Segment operating profit before exceptional items	5.2	1.1	1.8	2.5	0.7	11.3
Exceptional items						4.5
Operating profit						15.8
Net finance costs						(2.0)
Profit before taxation						13.8

			Six months ended 30 June 2009 (re-presented)
£million	Components	Sensors	Integrated Manufacturing Services	Secure Power	General Industrial	Total
Sales to external customers	93.9	46.8	38.5	26.4	22.0	227.6
Segment operating  profit/(loss) before  exceptional items	2.4	(4.3)	1.5	2.0	(2.1)	(0.5)
Exceptional items						(10.6)
Operating loss						(11.1)
Net finance costs						(3.3)
Loss before taxation						(14.4)

			Year ended 31 December 2009 (re-presented)
£million	Components	Sensors	Integrated Manufacturing Services	Secure Power	General Industrial	Total
Sales to external customers	190.8	105.4	75.1	59.1	49.7	480.1
Segment operating  profit/(loss) before  exceptional items	5.9	(3.9)	2.4	4.8	(2.7)	6.5
Exceptional items						(18.0)
Operating loss						(11.5)
Net finance costs						(5.7)
Loss before taxation						(17.2)

b)    Analysis of revenue - continuing operations

£million		Six months ended 30 June 2010	Six months ended 30 June 2009 (re-presented)	Year ended 31 December 2009 (re-presented)
By destination
United Kingdom		50.0	44.9	90.5
Rest of Europe		110.5	90.8	195.4
North America		68.7	60.5	130.8
Rest of the World		51.5	31.4	63.4
Total revenue		280.7	227.6	480.1

4.    Discontinued operations

       During the six months ended 30 June 2010, the Group disposed of the following four businesses, all of which were part of the General Industrial division:

·       MMG Canada Limited;

·       Wire Systems Technology (Pty) Limited;

·       MMG Magdev Limited; and

·       MMG India (Private) Limited

There were no discontinued operations during the six month period ended 30 June 2009. 

The results from discontinued operations for the period shown in the Condensed consolidated income statement are shown below:

£million	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 December 2009
Revenue	9.3	9.4	19.5
Cost of sales	(7.8)	(7.7)	(15.9)
Gross profit	1.5	1.7	3.6
Distribution costs	(0.7)	(0.9)	(1.7)
Administrative expenses	(0.7)	(0.9)	(1.9)
Operating profit	0.1	(0.1)	-
Net finance income	0.1	-	-
Profit/(loss) before taxation	0.2	(0.1)	-
Taxation	-	-	(0.2)
Profit/(loss) after taxation	0.2	(0.1)	(0.2)
Loss on disposal of discontinued operations	(0.7)	-	-
Loss from discontinued operations	(0.5)	(0.1)	(0.2)

The net cash flows from discontinued operations included within the condensed consolidated cash flow statement are shown below:

£million	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 December 2009
Operating activities	(1.7)	1.5	3.0
Investing activities	-	(0.1)	(0.2)
Financing activities	-	(0.4)	(0.4)
Net cash flow	(1.7)	1.0	2.4

5.    Exceptional items

£million	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 December 2009
Continuing operations
Restructuring costs
AB Automotive - closure costs	-	(4.2)	(4.1)
AB Automotive - property profit	-	0.9	0.9
Sensors - European restructuring	-	(6.4)	(7.4)
Sensors - Romford closure	-	-	(0.4)
IMS - UK consolidation including Aylesbury closure	-	(0.7)	(1.2)
Components - BI Technologies closure of     manufacturing	-	-	(1.0)
General Industrial restructuring	-	-	(1.4)
Other restructuring	-	(0.2)	(0.6)
Profit on sale of properties	1.0	-	1.0
Onerous property leases	(0.8)	-	-
Impairment of goodwill	-	-	(3.8)
Pensions curtailment gain from scheme closure	4.3	-	-
Total	4.5	(10.6)	(18.0)

a)   Six months ended 30 June 2010

For the six months ended 30 June 2010, the exceptional items relate to:

·       a curtailment gain of £4.3 million arising from the closure of the UK defined benefit scheme to future accrual;

·       profit of £1.0 million arising from the sale of property interests; and

·       a provision of £0.8 million which has been recognised in respect of two vacant properties subject to onerous long term leases.

b)   Six months ended 30 June 2009

       For the six months ended 30 June 2009, the exceptional items relate to:

·       the closure costs of the Automotive production sites in the UK, North America, Brazil and China following the decision to exit from the climate control business;

·       the closure of sensors production in the UK which has transferred to China and India;

·       the cost of significant reductions in headcount in Germany in the Sensors division; and

·       phase 1 of the consolidation of the IMS businesses in the UK into one business.

6.    Finance costs

£million	Six months ended 30 June 2010	Six months ended 30 June 2009 (re-presented)	Year ended 31 December 2009 (re-presented)
Interest expense	(1.7)	(2.3)	(3.6)
Interest on pension scheme obligations	(9.9)	(9.0)	(17.9)
Finance costs	(11.6)	(11.3)	(21.5)
Interest income	-	0.1	0.2
Expected return on pension scheme assets	9.6	7.9	15.6
Finance income	9.6	8.0	15.8
Net finance costs	(2.0)	(3.3)	(5.7)

7.    Taxation

       Taxation on the profit for the six months ended 30 June 2010 is based on the estimated full year rate of 33% for the year ending 31 December 2010. 

8.    Earnings per share

       Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of shares in issue during the period.  The weighted average number of shares in issue is 155.0 million.  There is no difference between basic and diluted earnings per share.

       Headline earnings per share is based on profit for the period from continuing operations adjusted for exceptional items and their associated tax effect.    

Pence		Six months ended 30 June 2010	Six months ended 30 June 2009		Year ended 31 December 2009
Basic and diluted earnings per share:
Continuing operations		6.9		(9.9)	(12.5)
Discontinued operations		(0.3)		-	(0.1)
Total		6.6		(9.9)	(12.6)
Headline earnings per share		4.0		(3.0)	(1.2)

       The numbers used in calculating headline, basic and diluted earnings/(loss) per share are shown below:

£million	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 December 2009
Continuing operations:
Profit/(loss) for the period attributable to owners of the company	10.7	(15.3)	(19.4)
Exceptional items	(4.5)	10.6	18.0
Tax effect of exceptional items	-	-	(0.4)
Headline earnings/(loss)	6.2	(4.7)	(1.8)
Discontinued operations:
Loss from discontinued operations	(0.5)	(0.1)	(0.2)

9.    Interim dividend

The Directors have declared an interim dividend of 0.8 pence per share which will be paid on 28 October 2010 to shareholders on the register on 15 October 2010.  Shares will be ex-dividend on 13 October 2010.

10.   Retirement benefit schemes

       The Group operated one significant defined benefit scheme in the UK and two overseas defined benefit schemes in the USA and Japan.  All of these schemes are closed to new members and in April 2010 the UK scheme was closed to future accrual, resulting in a curtailment gain of £4.3 million (included within exceptional items - see note 5).  Actuarial valuations of the schemes were carried out by independent qualified actuaries in 2007 and 2009 using the projected unit credit method. These actuarial valuations have been updated by the actuaries to assess the assets and liabilities of the schemes at 30 June 2010. Pension scheme assets are stated at market value at 30 June 2010.

       The amounts recognised in the consolidated balance sheet are:

£million		At 30 June 2010	At 30 June 2009	At 31 December 2009
Fair value of assets		317.8	268.5	306.5
Present value of liabilities		(361.4)	(301.7)	(350.2)
Net liability recognised on the balance sheet		(43.6)	(33.2)	(43.7)

       The costs/(income) recognised in the consolidated income statement are:

£million		Six months ended 30 June 2010	Six months ended 30 June 2009		Year ended 31 December 2009
Current service cost		0.7		0.8	1.7
Curtailment gain		(4.3)		-	(1.9)
Interest on obligation		9.9		9.0	17.9
Expected return on plan assets		(9.6)		(7.9)	(15.6)

11.   Reconciliation of net cash flow to movement in net debt

£million		Net cash/ (overdraft)	Borrowings and finance leases	Net debt
Balance at 31 December 2008		(12.2)	(101.0)	(113.2)
Cash flow		(0.9)	8.1	7.2
Exchange differences		0.8	5.2	6.0
Balance at 30 June 2009		(12.3)	(87.7)	(100.0)
Cash flow		37.5	6.7	44.2
Exchange differences		(0.7)	(0.4)	(1.1)
Balance at 31 December 2009		24.5	(81.4)	(56.9)
Cash flow		(5.8)	17.3	11.5
Non-cash movement		-	(0.1)	(0.1)
Exchange differences		0.5	0.4	0.9
Balance at 30 June 2010		19.2	(63.8)	(44.6)

       Net cash represents cash and cash equivalents less bank overdrafts.

       In May 2010 the Group refinanced its £70 million term loan which had been due for repayment in April 2011.  A new committed facility of £70 million over three years to May 2013 has been agreed with a club of four banks.

12.   Minority put option

       There is a cash settled put and call option associated with a minority interest in one of the Group's subsidiaries.  This has been accounted for under the anticipated acquisition method which results in the recognition of the put option at its fair value and the elimination of the minority interest.  Changes in the fair value of the put option are reflected as a movement of reserves.  An interest expense on the financial liability is recognised in the income statement.

13.   Related party transactions

       There are no material transactions with related parties during the six months ended 30 June 2010.

14.   Subsequent events

       There are no significant subsequent events.

 

END

 

 

IR XVLFFBVFEBBQ