TIDMSNR
RNS Number : 6337H
Senior PLC
31 July 2023
Interim Results for the half-year ended 30 June 2023
Adjusted profit before tax doubles year-on-year, outlook
maintained
change
Half year to 30 (constant
FINANCIAL HIGHLIGHTS June change currency) (4)
2023 2022
------------------------------------------ ----------- ---------- ---------- -------------
REVENUE GBP482.3m GBP402.2m +20% +16%
------------------------------------------ ----------- ---------- ---------- -------------
OPERATING PROFIT GBP20.8m GBP15.4m +35% +28%
ADJUSTED FOR:
AMORTISATION OF INTANGIBLE ASSETS GBP1.1m GBPnil
FROM ACQUISITIONS
NET RESTRUCTURING COST/(INCOME) GBP0.9m GBP(2.8)m
US PENSION SETTLEMENT GBP0.1m GBPnil
ADJUSTED OPERATING PROFIT (1) GBP22.9m GBP12.6m +82% +71%
ADJUSTED OPERATING MARGIN (1) 4.7% 3.1% +160 bps +150 bps
------------------------------------------ ----------- ---------- ---------- -------------
PROFIT BEFORE TAX GBP13.5m GBP11.1m +22% +14%
ADJUSTED PROFIT BEFORE TAX (1) GBP17.6m GBP8.8m +100% +87%
------------------------------------------ ----------- ---------- ---------- -------------
BASIC EARNINGS PER SHARE 2.80p 2.43p +15%
ADJUSTED EARNINGS PER SHARE (1) 3.53p 1.92p +84%
------------------------------------------ ----------- ---------- ---------- -------------
INTERIM DIVID PER SHARE 0.60p 0.30p +100%
------------------------------------------ ----------- ---------- ---------- -------------
FREE CASH FLOW (2) GBP(11.8)m GBP19.3m -161%
------------------------------------------ ----------- ---------- ---------- -------------
NET DEBT EXCLUDING CAPITALISED GBP119.4m GBP100.5m GBP19m Net debt
LEASES (2) increase / EBITDA(5)
- 30 June 2023 / 31 December 2022 1.6x
------------------------------------------ ----------- ---------- ---------- -------------
NET DEBT (2) GBP190.5m GBP178.9m GBP12m
- 30 June 2023 / 31 December 2022 increase
------------------------------------------ ----------- ---------- ---------- -------------
ROCE (3) 6.3% 2.3% +400bps
------------------------------------------ ----------- ---------- ---------- -------------
Highlights
-- Strong trading performance compared to prior year
-- Adjusted profit before tax doubled year-on-year
-- Robust core market demand, with a healthy book-to-bill of 1.20
-- Healthy balance sheet with net debt / EBITDA(5) of 1.6x
-- Spencer acquisition integration progressing well, with sales
up almost 50% year-on-year
-- Outlook maintained with strong growth anticipated for the full
year
-- Interim dividend of 0.60p approved, reflecting improved performance
and future prospects
Commenting on the results, David Squires, Group Chief Executive
Officer of Senior plc, said:
"Senior is on a strong trajectory with good growth across our
two divisions and profits doubling year-on-year. This year-on-year
increase reflected the strong momentum in our core markets and our
positioning on key growth platforms across both Flexonics and
Aerospace.
We are pleased with performance in our Flexonics Division where
margins have recovered well as sales have grown and in addition, we
had some one-off benefits related to cost recovery. We expect to
see year-on-year growth in the Flexonics division in H2, though we
are mindful of the commentary around some potential softening of
markets in the second half of the year.
Increasing aircraft build rates are starting to help build
momentum in our Aerospace Division. The ongoing supply chain
challenges are being actively managed but, as expected, are
temporarily dampening volume related operating leverage. Planned
aircraft build rate increases should lead to higher sales in H2
with supply chain challenges enduring but anticipated to be less
severe towards the end of the year. Looking ahead we can expect
Aerospace performance to continue to improve in 2024 and beyond as
supply chain challenges dissipate and production rates
increase.
Overall, the Board's expectations of strong growth for the Group
in 2023 are unchanged.
We remain on track to drive the Group ROCE to a minimum of 13.5%
in line with our previously stated ambition.
Our strategy and positioning in attractive and structurally
resilient core markets, combined with our sector leading
sustainability credentials and highly relevant technical
capabilities, provides confidence of continuing performance
improvements across our Aerospace and Flexonics Divisions and
enhanced value for our stakeholders."
Further information
+44 (0) 1923
Bindi Foyle, Group Finance Director, Senior plc 714 725
Gulshen Patel, Director of Investor Relations & Corporate +44 (0) 1923
Communications, Senior plc 714 722
+44 (0) 7796
Richard Webster-Smith , FGS Global 708 551
Notes
This Release, together with other information on Senior plc, can
be found at: www.seniorplc.com
(1) Adjusted operating profit and adjusted profit before tax are stated
before GBP1.1m amortisation of intangible assets from acquisitions
(H1 2022 - GBPnil), GBP0.9m net restructuring costs (H1 2022 -
GBP2.8m net income, see Note 4 for further detail) and GBP0.1m
US pension settlement costs (H1 2022 - GBPnil). Adjusted profit
before tax is also stated before costs associated with corporate
undertakings of GBP2.0m (H1 2022 - GBP0.5m, see Note 4 for further
detail). Adjusted operating margin is the ratio of adjusted operating
profit to revenue.
(2) See Note 12b and 12c for derivation of free cash flow and of net
debt, respectively.
(3) Return on capital employed ("ROCE") is derived from annual adjusted
operating profit (as defined in Note 4) divided by the average
of the capital employed at the start and end of that twelve-month
period, capital employed being total equity plus net debt (as
derived in Note 12c).
(4) H1 2022 results translated using H1 2023 average exchange rates
- constant currency.
(5) The following measures are used for the purpose of assessing covenant
compliance for the Group's borrowing facilities:-- EBITDA is adjusted profit before tax and before interest, depreciation,
amortisation and profit or loss on sale of property, plant
and equipment. It also excludes EBITDA from businesses which
have been disposed and includes EBITDA for businesses acquired
and it is based on frozen GAAP (pre-IFRS 16). EBITDA for the
12 month period ending June 2023 was GBP77.6m.
-- Net debt is defined in Note 12c. It is based on frozen GAAP
(pre-IFRS 16) and as required by the covenant definition, it
is restated using 12-month average exchange rates.
-- Interest is adjusted finance costs and investment income before
net finance income of retirement benefits. It also excludes
interest from businesses which have been disposed and it is
based on frozen GAAP (pre-IFRS 16).
-- The definition of adjusted items in the Consolidated Income
Statement is included in Note 4.
The Group's principal exchange rate for the US Dollar applied in the
translation of Income Statement and cash flow items at average H1 2023
rates was $1.23 (H1 2022 - $1.29) and applied in the translation of
balance sheet items at 30 June 2023 was $1.27 (30 June 2022 - $1.22;
31 December 2022 - $1.21).
Webcast
There will be a presentation on Monday 31 July 2023 at 11.00am
BST accessible via a live webcast 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 a FTSE 250 international manufacturing Group with
operations in 12 countries. It is listed on the main market of the
London Stock Exchange (symbol SNR). Senior's Purpose is "we help
engineer the transition to a sustainable world for the benefit of
all our stakeholders." Senior designs and manufactures high
technology components and systems for the principal original
equipment producers in the worldwide aerospace & defence, land
vehicle and power & 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 are made by the Directors in good faith based on the
information available to them at the time of their approval of this
IMR and they should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
INTERIM MANAGEMENT REPORT 2023
In the first half of 2023, Senior made good operational and
strategic progress. Trading performance was strong in the period
with revenue growing 20% and adjusted profit before tax doubling
over H1 2022.
The Group saw increased order intake during the period, with a
healthy book to bill ratio of 1.20 which underpins our confidence
in strong growth in 2023 and beyond. Both divisions recorded good
order intake demonstrating the broad, diversified and high-quality
nature of our business.
For the first half of 2023, Group revenue increased by 16% on a
constant currency basis to GBP482.3m with growth in both divisions.
This year-on-year increase reflected the strong momentum in our
core markets and our positioning on key growth platforms across
both Aerospace and Flexonics. The Group benefited from growth in
land vehicle and power & energy markets and the increases in
civil aircraft production rates, as well as pricing benefits of
GBP21.6m. Favourable exchange rates added GBP13.5m to total
sales.
In Flexonics, revenue grew 25% compared to prior year, on a
constant currency basis. This performance was driven by strong
customer demand and market share gains in land vehicles as well as
good momentum in power & energy markets. In Aerospace, revenue
increased 11% year-on-year on a constant currency basis. The
increase reflected ramp up in civil aircraft production rates and
improved activity in the defence market more than offsetting the
reduction in sales to semi-conductor equipment customers (which is
included in "Other Aerospace").
We measure Group performance on an adjusted basis, which
excludes items that do not directly reflect the underlying trading
performance in the period (see Note 4). References below therefore
focus on these adjusted measures.
The Group generated an adjusted operating profit of GBP22.9m (H1
2022 - GBP12.6m). Adjusted operating margin increased by 160 basis
points, to 4.7% for the half-year. Overall, price increases of
GBP21.6m offset material and other inflationary cost increases of
GBP18.7m in the first half of the year. The improved profitability
also reflected underlying volume related operating leverage,
particularly across our Flexonics operating businesses.
As is well documented, volatility in the Aerospace supply chain
continues. Whilst we are starting to see the first green shoots of
improvement, we continue to believe that it will be well into 2024
before we see normalisation in the supply chain. Meanwhile, our
operating businesses continue to focus on doing everything possible
to manage the supply chain issues and maintain service levels for
customers. We continue to work closely with our suppliers and
customers to minimise any potential disruptions, including from the
fire at one of our key suppliers in Thailand. We have made good
progress to mitigate the impact of the fire, establishing
alternative sources where possible. Our supplier has made good
headway with the factory rebuild but it will be well into 2024
before they have completed their efforts to re-establish full
capacity and have production lines re-qualified.
The Group's adjusted profit before tax doubled, increasing to
GBP17.6m (H1 2022 - GBP8.8m). The adjusted tax charge was GBP3.0m
(H1 2022 - GBP0.8m). Adjusted earnings per share increased by 84%
to 3.53 pence (H1 2022 - 1.92 pence).
Reported profit before tax was GBP13.5m, compared to GBP11.1m in
H1 2022. Basic earnings per share increased to 2.80 pence (H1 2022
- 2.43 pence).
In line with expectations, the Group recorded free cash outflow
of GBP11.8m (H1 2022 - GBP19.3m inflow) in the first half of 2023,
primarily due to investment in working capital reflecting
production growth. Cash outflows from working capital of GBP38.5m
(H1 2022 - GBP1.2m outflows) reflected higher receivables as a
result of revenue growth and planned investment in inventory to
enable us to meet the strong increase in demand from our customers,
as well as to mitigate ongoing supply chain issues in Aerospace .
Gross capital expenditure was GBP13.7m (H1 2022 - GBP11.5m) which
was 0.7x depreciation (excluding the impact of IFRS 16). The Group
experienced a net cash outflow of GBP18.1m (H1 2022 - GBP17.5m
inflow) in the six months to June 2023, due to free cash outflow of
GBP11.8m (H1 2022 - GBP19.3m inflow); GBP4.1m dividends paid;
GBP1.3m net outflows related to the US pension settlement,
restructuring and corporate undertakings; and GBP0.9m purchase of
shares held by the employee benefit trust.
The Group's balance sheet remains healthy with a period end net
debt to EBITDA of 1.6x, illustrating Senior's financial stability.
The headroom on our committed borrowing facilities at 30 June 2023
was GBP154.9m. Net debt at the end of June 2023 was GBP190.5m
(including capitalised leases of GBP71.1m), an increase of GBP11.6m
from December 2022, after taking into account favourable currency
movements of GBP8.9m and a GBP2.4m increase for lease
movements.
Return on capital employed ("ROCE") increased by 400 basis
points to 6.3% (H1 2022 - 2.3%). The significant increase in ROCE
reflected the doubling of profits. This improvement in ROCE keeps
the Group on track to deliver our Group ROCE target of 13.5% over
the medium term.
Reflecting the confidence in the Group's performance, financial
position and future prospects, the Board has approved an interim
dividend of 0.60 pence per share (H1 2022 - 0.30 pence), which is
double the prior year interim. This will be paid on 10 November
2023 to shareholders on the register at close of business on 13
October 2023. In the medium term, we will continue to follow a
progressive dividend policy reflecting earnings per share, free
cash flow generation, market conditions and dividend cover.
Market Overview
In the first half of 2023, our core markets across the Group
continued to improve.
Land Vehicle (22% of Group)
Good momentum in the land vehicle market continued in the first
half of 2023, with all segments growing.
According to Americas Commercial Transportation ("ACT")
research, North American heavy-duty truck production grew by 14% in
the first half of 2023 compared to H1 2022. At our FY results in
February, ACT had been expecting market decline of 3% in 2023 but
now are predicting overall growth in the year due to ongoing
strength in the US economy. According to IHS Markit Inc. ("IHS"),
European truck and bus market production grew by 12% in the first
half of the year and growth for the full year 2023 is forecast to
be 3% year-on-year. Whilst it is too early to predict what will
happen in 2024, the global commercial vehicle market is expected to
grow at low single digit compound annual growth rate through the
cycle. We will continue to monitor the end market conditions
carefully across the various regions in which we operate and seek
to maximise growth opportunities.
Light vehicle production in the first half of 2023 continued to
benefit from less disruption to supply chains, helped by improving
availability of semi-conductor chips. According to IHS, European
light vehicle production grew by 16% in first half of the year. It
is forecast to grow by 9% in the full year 2023.
According to the International Energy Agency ("IEA") , global
electric car sales have continued their strong growth in 2023,
registering 25% year-on-year growth during the first quarter. The
IEA are forecasting 35% growth in electric car sales for 2023,
thus, accounting for 18% of total car sales across 2023. The
Bloomberg New Energy Finance Electric Vehicle Outlook 2023 report
predicts that by 2026, plug-in vehicles will represent 30% of new
passenger vehicle sales globally, 44% by 2030 and 75% by 2040. With
the i ncreasing adoption of electrification for both land vehicle
and stationary power applications set to continue into the
long-term future, this market is fast growing and represents a
major opportunity for Senior in the medium and long term,
particularly for our proprietary battery cooling technology.
Power & Energy (15% of Group)
In the first half of 2023, power & energy markets grew with
higher levels of activity in upstream oil and gas continuing and
improving levels of maintenance and overhaul, highlighting the need
for energy security stemming from the Ukraine crisis.
Growth in electricity demand is forecast to continue increasing
steadily, rising from 2.6% per annum in 2023 to an average 3.2% per
annum in 2024-2025. The IEA's outlook for 2023 to 2025 shows that
renewable power generation is set to increase more than all other
sources combined, with an annualised growth rate of over 9%.
According to the IEA, global demand for oil will grow by 2% in
2023. Going forward, demand is forecast to grow by 1% per year
until 2028. Global refining capacity has continued to modestly
expand in 2023 and is forecast to grow by 4% by 2028, with the main
driver being jet fuel demand.
Given its role as a zero-carbon electricity source, momentum in
nuclear power has continued building; further accelerated given the
importance of security of energy supply. The International Atomic
Energy Agency has noted that nuclear energy has an important role
to play in enabling countries to move away from fossil fuels,
achieve their net zero targets, and reinforce climate resilience in
energy systems. Whilst extending lifetimes of nuclear plants is
likely to be an important part of a cost-effective path to this, it
is feasible that half of the emission reductions by 2050 may come
from small modular reactors (SMRs) due to their lower cost, smaller
size, and reduced project risks. We are actively monitoring
developments in this area and the resultant opportunities for
Senior.
Civil Aerospace (42% of Group)
Air traffic continued to increase, with all regions showing
improvements in the first quarter of 2023. According to the
International Air Transport Association ("IATA"), latest May 2023
data showed that domestic passenger numbers now exceed 2019 levels,
while international passenger numbers have reached 91% of 2019
levels.
The picture for civil aerospace programmes remains positive.
Both Airbus and Boeing have confirmed their guidance for increased
build rates across their key narrow and widebody programmes.
In the medium and longer term, structural growth in air travel
of c. 3-4% per annum is expected to be driven by growing air
traffic demand in Asia. IATA expects demand for air travel to
double by 2040, with passenger numbers expected to increase by 3.9
billion. Asia Pacific will contribute more than half of the
forecast growth supported by favourable demographics and growth in
household incomes. This, along with the replacement of older
aircraft with the latest generation, more fuel-efficient models,
will underpin demand for new aircraft.
With our diversified product portfolio in the aerospace sector,
including attractive positions across the newest generation of
single aisle aircraft platforms, Senior is well positioned to
benefit from the ongoing market recovery, and increased aircraft
build rates.
Defence (13% of Group)
Senior's sales to the Defence sector are primarily focused on
the US market. The approved base budget for US defence in Fiscal
Year 2023 was $816bn, with a further $36bn of supplemental funding
also provided. For Fiscal Year 2024, the US Department of Defense's
base budget request is $842bn, a 3% increase on the base budget for
2023.
Senior is well placed to benefit from this level of spend with
good content on the F-35 Joint Strike Fighter, mature programmes
such as the C-130 transport aircraft, and newer programmes such as
the T-7A Red Hawk trainer.
Other Aerospace (8% of Group)
Sales from our Aerospace operating businesses into end markets
outside of the civil aerospace and defence markets are classified
under "Other Aerospace" and include sales into the space,
semi-conductor equipment and medical markets. Using our world class
bellows technology, we manufacture highly engineered proprietary
products to provide unique solutions for semi-conductor
manufacturing equipment.
As expected, for 2023, the World Semiconductor Trade Statistics
("WSTS") forecast the global semi-conductor market to contract by
10%, however, the overall semi-conductor equipment market is
projected to grow at a CAGR of 10% from 2023 to 2028.(1)
The Low Earth Orbit (LEO) Satellite Market has grown
exponentially in recent years and is forecast to record a CAGR of
12% from 2023 to 2028.(2) We have good positions with key market
players in this sector so should benefit from this strong
growth.
We are ensuring we are appropriately resourced to take advantage
of the market-led opportunities across our Flexonics and Aerospace
Divisions.
(1) Research and markets, Global Semiconductor Manufacturing Equipment
Market Analysis Report 2023-2028, May 2023
(2) Mordor Intelligence, Low Earth Orbit (LEO) Satellite Market
& Share Analysis - Growth trends & forecast (2023-2028)
Delivery of Group Strategy
Purpose
Our Purpose is "we help engineer the transition to a sustainable
world for the benefit of all our stakeholders". We do this by:
-- Using our technology expertise in fluid conveyance and thermal
management to provide safe and innovative products for demanding
applications in some of the most hostile environments.
-- Enabling our customers, who operate in the hardest-to-decarbonise
sectors, to transition to low carbon and clean energy solutions.
-- Staying at the forefront of climate disclosure and action by ensuring
our own operations achieve our Net Zero commitments.
Technology
Our extensive design expertise, intellectual property and
know-how, and technology supports our strategic focus on fluid
conveyance and thermal management. This enables us to develop and
supply proprietary products, sub-systems and systems for our
customers' demanding applications across a range of diverse and
attractive end markets.
Our strategy of focusing on fluid conveyance and thermal
management is positioning Senior to offer pivotal technologies for
emissions reduction and environmental efficiency, capabilities that
continue to be highly relevant as the world transitions towards a
low carbon economy. Not only are we actively focused on new product
offerings that support the transition to a low-carbon world, but we
are actively involved in making conventional technology cleaner to
bridge the gap between both worlds.
Alignment of our technology and product roadmaps to these trends
is enhanced by a product development strategy that is compatible
with our focus on sustainability and the anticipated needs of our
customers during this transition. Senior remains on track with our
technology and product roadmaps, and we are seeing pull-through of
our technology themes into customer applications and in support of
research and development programmes. For example, the Airbus "Wing
of Tomorrow" development program explores new manufacturing and
assembly techniques for future wing concepts. The program serves as
a test bed for various design and manufacturing technology concepts
that will be incorporated into future platforms. Senior has
developed an innovative duct for this program which allows for
rapid assembly during wing production. Developed jointly between
Senior and the customer, this innovative design consolidates
previously discrete sections of the ducting system into a
ready-to-assemble kit that can be "dropped in" during the wing
assembly process. This new method delivers significant time savings
over the conventional process and is an excellent example of
leveraging our core design and manufacturing capabilities to
deliver benefits for our customers.
Electrification and hydrogen power are poised to remain the key
technology themes in many of our end markets in the decades to
come. Our fluid conveyance and thermal management technology,
highly relevant to these themes, will continue to help us support
our customers with high-value solutions in the medium- and
long-term to bridge the transition to sustainable technologies for
the future in a low carbon economy.
Spencer integration
The integration of Spencer Aerospace, which we acquired in
November 2022, has been progressing well during the first half of
the year. Sales were up almost 50% in H1 2023 compared to H1 2022
and we are pursuing multiple new business opportunities, both in
Spencer's traditional North American home markets, and in Europe
where they are working collaboratively with our French Aerospace
business, Ermeto.
Aerostructures strategy
The strategy for our Aerostructures businesses has been
progressing well. Our focus in this area is to:
-- fill our existing capacity;
-- pursue some further diversification into Space and Defence; and
-- grow market share profitably in Civil Aerospace.
We remain confident of further performance improvement in our
Aerostructures business as production volumes continue to ramp.
Considered and effective capital deployment
We understand the importance of considered and effective capital
deployment towards maximising shareholder value creation. The Group
has a financial objective to maintain an overall ROCE in excess of
the Group's cost of capital and to target a minimum pre-tax return
on capital employed of 13.5% on a post IFRS 16 basis. Our strategy
of expanding Senior's high-quality fluid conveyance and thermal
management businesses remains a priority. All significant
investments are supported by a business case and are assessed using
a rigorous investment appraisal process.
To maximise the Group's operating efficiency and overall
effectiveness we actively review our overall portfolio of operating
businesses and evaluate them in terms of their strategic fit within
the Group. As indicated at our Full Year results in February 2023,
we continue to consider the best time to relaunch the
Aerostructures potential divestment process to ensure we optimise
value for shareholders, taking into account financing markets and
end market conditions.
Sustainability
Sustainability is an integral part of our overall strategy. We
always aim to deliver our products in a manner that is both
environmentally sustainable and supports economic growth through
sustainable methods. This means that in implementing our strategy,
we are committed to using resources responsibly, investing for the
long-term wellbeing of the planet and ensuring that all people
involved in and with our businesses are treated fairly.
Our technology and expertise are key enablers of emission
reductions and will only grow more relevant as the world
transitions to Net Zero. They are applied across different
applications, working in close partnership with our customers, to
develop solutions that support both their commercial and
sustainability objectives.
In the first half of the year, we continue to make progress
against our sustainability metrics and activities:
Environment
-- Awarded the top 'A' score by CDP in its global annual ranking
for transparency on climate change; the only Aerospace and Defence
company to achieve an A rating for 2022. In February 2023, CDP
also awarded Senior the highest 'A' leadership status in its annual
supplier engagement ratings.
-- We remain on track to achieve our Scope 1, 2 and 3 Science Based
Target Initiative ("SBTi") verified Near Term Targets.
-- We have submitted our Long-Term Net Zero Targets to SBTi for validation.
The targets, to be achieved by 2040, are aligned to keep global
warming to 1.5 degrees centigrade, the most ambitious goal of
the Paris Agreement.
-- Approximately 47% of our electricity was sourced from renewable
energy, an increase from 41% in December 2022.
-- We recycled 95.4% of waste produced.
Social
-- Recognising the impact of high rates of inflation, Senior is continuing
to take steps to help the broader workforce including salary settlements
that reflected regional cost of living pressures and promoting
wellbeing initiatives.
-- Following our second Global Employee Opinion Survey undertaken
in September 2022, our operating businesses are making good progress
on implementing their action plans having communicated the results
to their teams via employee briefing sessions.
-- Our Lost Time Injury Rate has reduced to 0.28 for H1 2023, an
improvement from 0.38 at the end of 2022. In 2022, we introduced
additional safety initiatives focusing on ergonomics and hand
protection to support our 2025 Lost Time Injury Rate reduction
goal.
-- Currently, 57% of the Board Directors are female, including the
Chair of the Audit Committee, the Senior Independent Director,
who is also Chair of the Remuneration Committee, and the Group
Finance Director. Two of the Directors (29%) are from ethnic minority
backgrounds.
Governance
-- In June 2023, employees received refresher training on Senior's
Code of Conduct including Protecting Human Rights and International
Trade Compliance.
-- Climate Change training has been rolled out in June 2023 to key
stakeholders across the Group including the Board, senior managers
from the Group's operating businesses, and Finance, HR and HS&E
teams.
-- Employees continue to receive training and regular reminders about
the risks related to information/cyber security.
Outlook
Senior is on a strong trajectory with good growth across our two
divisions and overall, the Board's expectations of strong growth
for the Group in 2023 are unchanged.
We expect to see year-on-year growth in the Flexonics division
in H2, though we are mindful of the commentary around some
potential softening of markets in the second half of 2023.
In Aerospace, planned aircraft build rate increases should lead
to higher sales in H2 with supply chain challenges enduring but
anticipated to be less severe towards the end of the year. Looking
ahead we can expect Aerospace performance to continue to improve in
2024 and beyond as supply chain challenges dissipate and production
rates increase.
We remain on track to drive the Group ROCE to a minimum of 13.5%
in line with our previously stated ambition.
Our strategy and positioning in attractive and structurally
resilient core markets, combined with our sector leading
sustainability credentials and highly relevant technical
capabilities, provides confidence of continuing performance
improvements across our Aerospace and Flexonics Divisions and
enhanced value for our stakeholders.
DAVID SQUIRES
Group Chief Executive Officer
DIVISIONAL REVIEW
Flexonics Division
The Flexonics Division represents 37% (H1 2022 - 34%) of Group
revenue and consists of 12 operations which are located in North
America (four), continental Europe (two), the United Kingdom (two),
South Africa, India, and China (two including the Group's 49%
equity stake in a land vehicle product joint venture). This
Divisional review, presented before the share of the joint venture
results, is on a constant currency basis, whereby H1 2022 results
have been translated using H1 2023 average exchange rates. There
are no reconciling items between adjusted operating profit and
operating profit in H1 2023. The Division's operating results on a
constant currency basis are summarised below:
H1 2023 H1 2022 (1) Change
Revenue GBP178.6m GBP142.4m +25.4%
Adjusted operating profit GBP20.2m GBP11.9m +69.7%
Adjusted operating margin 11.3% 8.4% +290bps
H1 2022 results translated using H1 2023 average exchange rates
(1) - constant currency.
Divisional revenue increased by GBP36.2m (25.4%) to GBP178.6m
(H1 2022 - GBP142.4m) and adjusted operating profit increased by
GBP8.3m (69.7%) to GBP20.2m (H1 2022 - GBP11.9m).
Revenue Reconciliation GBPm
H1 2022 revenue GBP142.4m
Land vehicles GBP25.7m
Power & energy GBP10.5m
H1 2023 revenue GBP178.6m
==========
Flexonics core markets grew strongly in the first half of the
year helping sales in H1 2023 to increase by 25.4% compared to the
prior period.
Group sales to land vehicle markets increased by 32.8% driven by
increased market and customer demand and market share gains for
both commercial and passenger vehicles. Senior's sales to the North
American truck and off-highway market increased by GBP7.2m (16.1%),
while sales to other truck and off-highway regions, including
Europe and India, increased by GBP8.6m (47.5%). Our strong sales in
truck markets were aided by production increases on recently won
contracts. Group sales to passenger vehicle markets increased by
GBP9.9m (64.3%) in the year, benefiting from the launch and ramp up
of new programmes in North America and Europe.
In the Group's power & energy markets good momentum
continued as sales increased by GBP10.5m (16.4%) in the year. Sales
to oil and gas customers increased by GBP7.6m (39.4%), as a result
of higher demand mainly from upstream activity as well as improving
levels of maintenance and overhaul. Sales to other power &
energy markets increased by GBP2.9m reflecting growth in sales to
medical and steel industry customers.
Adjusted operating profit increased by GBP8.3m compared to prior
period and the divisional adjusted operating margin increased by
290 basis points to 11.3% (H1 2022 - 8.4%). This significant
improvement in profitability reflected the underlying volume
related operating leverage across our operating business and the
benefits from recurring price increases and one-off cost recoveries
which offset inflationary cost increases.
Power & energy markets grew in the first half of 2023 and
this positive momentum is expected to continue given higher
activity in upstream oil & gas and maintenance and overhaul
sectors. As we enter H2, land vehicle customer demand is holding up
well and ACT research are now forecasting overall growth this year
(having previously forecasted a market decline of 3%).
Overall, we expect to see year-on-year growth in the Flexonics
division in H2, though we are mindful of the commentary around some
potential softening of markets in the second half of the year. We
will monitor end market conditions carefully across the various
regions in which we operate and seek to maximise growth
opportunities.
Aerospace Division
The Aerospace Division represents 63% (H1 2022 - 66%) of Group
revenue and consists of 14 operations. These are located in North
America (six), the United Kingdom (four), France (two), Thailand
and Malaysia. This Divisional review is on a constant currency
basis, whereby H1 2022 results have been translated using H1 2023
average exchange rates and on an adjusted basis to exclude
amortisation of intangible assets from acquisitions and net
restructuring income/costs. The Division's operating results on a
constant currency basis are summarised below:
H1 2023 H1 2022 (1) Change
Revenue GBP304.1m GBP273.5m +11.2%
Adjusted operating profit GBP11.6m GBP10.1m +14.9%
Adjusted operating margin 3.8% 3.7% +10bps
H1 2022 results translated using H1 2023 average exchange rates
(1) - constant currency.
Divisional revenue increased by GBP30.6m (11.2%) to GBP304.1m
(H1 2022 - GBP273.5m) whilst adjusted operating profit increased by
GBP1.5m (14.9%) to GBP11.6m (H1 2022 - GBP10.1m).
Revenue Reconciliation GBPm
H1 2022 revenue GBP273.5
Civil aerospace GBP35.5
Defence GBP1.5
Other markets GBP(6.4)
H1 2023 revenue GBP304.1
=========
Revenue in the Aerospace Division increased by 11.2%
year-on-year on a constant currency basis, benefiting from the
overall recovery in demand. The year-on-year increase reflected the
ramp up in civil aircraft production rates and improved activity in
the defence market. As anticipated, sales to semi-conductor
equipment customers reduced due to lower cyclical market
demand.
The civil aerospace sector had the strongest growth during the
period with Senior's sales increasing by 21.4% compared to prior
year. Aircraft production rates were higher in H1 2023 compared to
H1 2022, driven particularly by single aisle aircraft, regional and
large business jets. Widebody production rates are planned to
increase towards the end of the year. 22% of civil aerospace sales
were from widebody aircraft in the first half of 2022, with the
other 78% sales being from single aisle, regional and business
jets.
Total revenue from the defence sector increased by GBP1.5m
(2.4%) primarily from the increase in F-35 production.
Revenue derived from other markets such as space, power &
energy, medical and semi-conductor equipment, where the Group
manufactures products using very similar technology to that used
for certain aerospace products, decreased by GBP6.4m (14.1%) as a
result of the decrease in demand from the semi-conductor equipment
market.
During the period, adjusted operating profit increased by 14.9%
to GBP11.6m (H1 2022 - GBP10.1m) and the adjusted operating margin
increased by 10 basis points to 3.8% (H1 2022 - 3.7%). Price
increases attained during the period helped to offset the impact of
material and other inflationary cost increases. As expected,
inefficiencies largely caused by the enduring supply chain
challenges are significantly, but temporarily, dampening volume
related drop through benefits. As disclosed at our full year
results, our Thailand operating business is being impacted by a
fire at a key supplier which happened in February this year. We
have made good progress to mitigate the impact of the fire,
establishing alternative sources where possible. Our supplier has
made good headway with the factory rebuild but it will be well into
2024 before they have completed their efforts to re-establish full
capacity and have production lines re-qualified.
Throughout the period o ur operating businesses kept their focus
on doing everything possible to manage the supply chain issues and
maintain service levels for customers. Whilst we are starting to
see the first green shoots of improvement, we continue to believe
that it will be well into 2024 before we see normalisation in the
supply chain.
As aircraft build rates increase through the second half of the
year, we can expect higher sales in the division in H2 compared to
H1 although we should continue to expect the volume related drop
through benefits to be temporarily dampened by the ongoing supply
chain challenges described. Looking further ahead we can expect
Aerospace performance to improve in 2024 and beyond as these supply
chain challenges dissipate and production rates continue to
increase.
OTHER FINANCIAL INFORMATION
Group revenue
Group revenue was GBP482.3m (H1 2022 - GBP402.2m). Excluding the
favourable exchange rate impact of GBP13.5m, Group revenue
increased by GBP66.6m (16.0%), of which GBP21.6m related to
pricing. Revenue grew in both Aerospace and Flexonics
year-on-year.
Operating profit
Adjusted operating profit increased by GBP10.3m (81.7%) to
GBP22.9m (H1 2022 - GBP12.6m). Excluding the favourable exchange
rate impact of GBP0.8m, adjusted operating profit increased by
GBP9.5m (70.9%) on a constant currency basis. After accounting for
GBP1.1m amortisation of intangible assets from acquisitions (H1
2022 - GBPnil), GBP0.9m net restructuring costs (H1 2022 - GBP2.8m
net income) and GBP0.1m US pension settlement costs, reported
operating profit was GBP20.8m (H1 2022 - GBP15.4m). Reported
operating profit in the Aerospace Division was GBP9.6m (H1 2022 -
GBP12.6m) and reported operating profit in the Flexonics Division
was GBP20.8m (H1 2022 - GBP11.4m).
The Group's adjusted operating margin increased by 160 basis
points, to 4.7% for the half year. This improved profitability
principally reflected volume related operating leverage across our
businesses. Inflationary pressures were successfully mitigated by
diligently managing costs and by increasing prices and surcharges
where possible. Overall price increases of GBP21.6m offset material
and other inflationary cost increases of GBP18.7m.
Finance costs and investment income
Finance costs, net of investment income and before unwinding of
discount on deferred and contingent consideration increased to
GBP5.3m (H1 2022 - GBP3.8m) and comprise IFRS 16 interest charge on
lease liabilities of GBP1.5m (H1 2022 - GBP1.2m), net finance
income on retirement benefits of GBP1.0m (H1 2022 - GBP0.6m) and
net interest charge of GBP4.8m (H1 2022 - GBP3.2m). This increase
was driven by higher underlying interest rates on variable rate
debt and higher levels of indebtedness in H1 2023 versus the prior
period.
Tax charge
The adjusted tax rate for the period was 17.0% (H1 2022 - 9.1%),
being a tax charge of GBP3.0m (H1 2022 - GBP0.8m) on adjusted
profit before tax of GBP17.6m (H1 2022 - GBP8.8m). The adjusted tax
rate benefitted from enhanced deductions for R&D expenditure in
the US, the super-deduction for capital expenditure in the UK, as
well as prior year items.
The reported tax rate was 14.1% charge, being a tax charge of
GBP1.9m on reported profit before tax of GBP13.5m. This included
GBP1.1m tax credit against items excluded from adjusted profit
before tax, of which GBP0.3m credit related to amortisation of
intangible assets from acquisitions, GBP0.3m credit related to net
restructuring costs and a GBP0.5m credit related to corporate
undertakings in the half year. The 2022 half year reported tax rate
was 9.0%, being a tax charge of GBP1.0m on reported profit before
tax of GBP11.1m. This included GBP0.2m net tax charge against items
excluded from adjusted profit before tax, of which GBP0.1m credit
related to the corporate undertakings and GBP0.3m charge related to
net restructuring income.
Cash tax paid was GBP2.4m (H1 2022 - GBP1.7m) and is stated net
of refunds received of GBP2.7m (H1 2022 - GBP1.3m) of tax paid in
prior periods, arising from the offset of tax losses against
taxable profits of prior periods.
Earnings per share
The weighted average number of shares, for the purposes of
calculating undiluted earnings per share, decreased to 413.9
million (H1 2022 - 416.4 million). The decrease arose principally
due to the purchase of shares held by the employee benefit trust
during 2022 and the first half of 2023. The adjusted earnings per
share was 3.53 pence (H1 2022 - 1.92 pence). Basic earnings per
share was 2.80 pence (H1 2022 - 2.43 pence). See Note 7 for details
of the basis of these calculations.
Return on capital employed ("ROCE")
ROCE, a key performance indicator for the Group as defined
above, increased by 400 basis points to 6.3% (H1 2022 - 2.3%). The
increase in ROCE was mainly a result of the significant increase in
adjusted operating profit compared to prior half year.
Cash flow
The Group generated free cash outflow of GBP11.8m in H1 2023 (H1
2022 - GBP19.3m inflow) as set out in the table below:
H1 2023 H1 2022
GBPm GBPm
-------------------------------------------------------------- -------- ----------
Operating profit 20.8 15.4
Amortisation of intangible assets from acquisitions 1.1 -
Net restructuring costs/(income) 0.9 (2.8)
US pension settlement 0.1 -
-------------------------------------------------------------- -------- ----------
Adjusted operating profit 22.9 12.6
Depreciation (including amortisation of software) 25.0 24.5
Working capital and provisions movement, net of
restructuring items (38.5) (1.2)
Pension contributions (0.3) (2.3)
Pension service and running costs 0.7 0.7
Other items(1) 0.4 2.2
Interest paid, net (6.0) (4.1)
Income tax paid, net (2.4) (1.7)
Capital expenditure (13.7) (11.5)
Sale of property, plant and equipment 0.1 0.1
-------------------------------------------------------------- -------- ----------
Free cash flow (11.8) 19.3
Corporate undertakings 0.1 (0.5)
Net restructuring cash paid (0.6) (1.3)
US pension settlement (0.8) -
Dividends paid (4.1) -
Purchase of shares held by employee benefit trust (0.9) -
-------------------------------------------------------------- -------- ----------
Net cash flow (18.1) 17.5
Effect of foreign exchange rate changes 8.9 (11.0)
IFRS 16 non-cash additions and modifications including
acquisition (2.4) (2.8)
-------------------------------------------------------------- -------- ----------
Change in net debt (11.6) 3.7
-------------------------------------------------------------- -------- ----------
Opening net debt (178.9) (153.1)
-------------------------------------------------------------- -------- ----------
Closing net debt (190.5) (149.4)
-------------------------------------------------------------- -------- ----------
(1) Other items comprises GBP1.4m share-based payment charges (H1
2022 - GBP2.2m), GBP(0.6m) profit on share of joint venture (H1
2022 - GBP(0.1m)), GBP(0.3m) working capital and provision currency
movements (H1 2022 - GBP0.2m) and GBP(0.1m) profit on sale of
fixed assets (H1 2022 - GBP(0.1m)).
Capital expenditure
Gross capital expenditure of GBP13.7m (H1 2022 - GBP11.5m) was
0.7 times depreciation excluding the impact of IFRS 16 (H1 2022 -
0.6 times). The disposal of property, plant and equipment raised
GBP0.1m (H1 2022 - GBP0.1m). For the full year 2023, capital
investment is expected to be in line with depreciation (excluding
the impact of IFRS 16). We are prioritising new investment on
sustainability related items; important replacement equipment for
current production; and growth projects where contracts have been
secured.
Working capital
Working capital balances increased by GBP32.5m in the first half
of 2023 to GBP163.8m (31 December 2022 - GBP131.3m), after GBP7.4m
favourable foreign currency movements. The underlying increase
reflects increased trading in the period. Receivables were higher
as a result of revenue growth and inventory was higher with planned
investment to enable us to meet the strong increase in demand from
our customers, as well as to mitigate ongoing supply chain issues
in Aerospace. In the first half of 2023, working capital increased
as a percentage of sales by 210 basis points to 17.6% (31 December
2022 - 15.5%). Although we may continue to see an increase in
working capital over the coming year, we will continue our
relentless and effective focus on working capital management.
Retirement benefit schemes
The retirement benefit surplus in respect of the Group's UK
defined benefit pension plan ("the UK Plan") decreased by GBP3.8m
to GBP48.0m (31 December 2022 - GBP51.8m) due to GBP4.7m net
actuarial losses and GBP0.4m running costs partly offset by GBP1.3m
net interest income. Retirement benefit deficits in respect of the
US and other territories decreased by GBP2.2m to GBP9.9m (31
December 2022 - GBP12.1m). During the first half of 2023, one of
the US defined benefit plans was partially settled following a
combination of lump sum payments and annuity purchase. A net
expense of GBP0.1m, recognised as an adjusting item to operating
profit (see Note 4), and cash outflow of GBP0.8m (see Note 12b) was
recorded in the first half of 2023 in relation to this
settlement.
The triennial actuarial valuation of the UK Plan as at 5 April
2022 showed a surplus of GBP24.5m (5 April 2019 - deficit of
GBP10.2m). The Group's deficit reduction cash contributions,
including administration costs, to the UK Plan ceased on 30 June
2022.
The estimated cash contributions expected to be paid during the
full year 2023 in the US funded plans is GBP1.6m (GBP0.4m was paid
in 2022).
Net debt
Net debt which includes IFRS 16 lease liabilities increased by
GBP11.6m to GBP190.5m at 30 June 2023 (31 December 2022 -
GBP178.9m). As noted in the cash flow above, the Group generated
net cash outflow of GBP18.1m (as defined in Note 12c), after
GBP8.9m favourable foreign currency movements and GBP2.4m non-cash
changes in lease liabilities due to additions and
modifications.
Net debt excluding IFRS 16 lease liabilities of GBP71.1m (31
December 2022 - GBP78.4m) increased by GBP18.9m to GBP119.4m at 30
June 2023 (31 December 2022 - GBP100.5m), due to free cash outflow
of GBP11.8m, GBP5.0m capital repayment of leases, GBP5.0m outflow
for dividends and purchase of shares and GBP1.3m net cash outflows
for corporate undertakings, restructuring and US pension settlement
partially offset by GBP4.2m favourable foreign currency
movements.
Funding and Liquidity
At 30 June 2023, the Group held committed borrowing facilities
of GBP274.3m and the Group had headroom of GBP154.9m under these
committed facilities. The weighted average maturity of the Group's
committed facilities is 3.0 years at 30 June 2023. Net debt
(defined in Note 12c) was GBP190.5m, including GBP71.1m of
capitalised leases which do not form part of the definition of debt
under the committed facilities and do not impact the Group's
lending covenants.
The Group has two covenants for committed borrowing facilities,
which are tested at June and December: the Group's net debt to
EBITDA (defined in the Notes to the Financial Headlines) must not
exceed 3.0x and interest cover, the ratio of EBITDA to interest
must be higher than 3.5x. At 30 June 2023, the Group's net debt to
EBITDA was 1.6x and interest cover was 8.9x, both comfortably
within covenants limits. For all testing periods within the Going
Concern Period, there is sufficient headroom to remain within the
covenant limits and the Group's committed borrowing facilities,
even in a severe but plausible downside scenario.
Going concern basis
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. Accordingly, they continue to
adopt the going concern basis of accounting in preparing these
Condensed Consolidated Interim Financial Statements, having
undertaken a rigorous assessment of the financial forecasts.
Further details are provided in Note 2.
Risks and uncertainties
The principal risks and uncertainties faced by the Group have
been reviewed during the first half of 2023. The Group's principal
risk list as at 30 June 2023 and for the remaining six months of
the financial year has remained unchanged from those set out in
detail on pages 64 to 71 of the Annual Report & Accounts 2022
(available at www.seniorplc.com ). Details regarding the mitigating
actions the Board has established in response to the risks and
uncertainties can also be found on the same pages of the Annual
Report & Accounts 2022. These mitigating actions are reviewed
and updated regularly.
Supply chain disruption and inflationary pressures have
persisted into 2023 and the Group continues to diligently manage
the challenging business environment through a wide variety of
mitigation techniques. While inflation in the US has moderated and
key inflationary indicators point to continued cooling of US core
inflation rates throughout the remainder of 2023, UK inflation
rates remain high, with the easing of inflationary pressures in the
UK lagging behind the US and other large economies. The risks to
the Group from Economic and Geopolitical Impact remain elevated as
concerns over a global economic downturn linger and political
tensions remain escalated in parts of the world. We continue to
closely monitor and assess the economic and geopolitical
developments that pose the potential to impact the Group and its
key stakeholders.
The Group's risk and assurance framework continues to serve as
an effective foundation from which to monitor and address shifting
business conditions in this unsettled economic climate. Additional
information regarding the risk and assurance framework is set out
on pages 60 to 62 of the Annual Report and Accounts 2022 (available
at www.seniorplc.com ).
Responsibility statement of the Directors in respect of the
half-yearly financial report
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
for use by the UK;
2. the Interim Management Report herein includes a fair review of
the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being 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 a description
of the principal risks and uncertainties for the remaining six
months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party 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 entity during that period; and any changes in the related
party transactions described in the last annual report that could
do so.
By Order of the Board
David Squires Bindi Foyle
Group Chief Executive Officer Group Finance Director
28 July 2023 28 July 2023
INDEPENT REVIEW REPORT TO SENIOR PLC
Conclusion
We have been engaged by the Senior Plc ("the Company") to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 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.
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 2023 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention that causes us to believe that the directors have
inappropriately adopted the going concern basis of accounting, or
that the directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Group will continue in operation.
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.
As disclosed in Note 2, the Annual Financial Statements of the
Group are prepared in accordance with UK-adopted international
accounting standards.
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 for use in the UK.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
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. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
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.
Mike Barradell
for and on behalf of KPMG LLP, Chartered Accountants
15 Canada Square, London, E14 5GL
28 July 2023
Condensed Consolidated Income Statement
For the half-year ended 30 June 2023
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2023 2022 2022
GBPm GBPm GBPm
Revenue 3 482.3 402.2 848.4
---------- ---------- --------
Trading profit 20.2 15.3 32.1
Share of joint venture profit 9 0.6 0.1 0.4
Operating profit (1) 3 20.8 15.4 32.5
Investment income 2.9 0.7 1.9
Finance costs (9.6) (4.5) (10.6)
Corporate undertakings 4 (0.6) (0.5) (1.4)
---------- ---------- --------
Profit before tax (2) 13.5 11.1 22.4
Tax charge 5 (1.9) (1.0) (2.2)
---------- ---------- --------
Profit for the period 11.6 10.1 20.2
---------- ---------- --------
Attributable to:
Equity holders of the parent 11.6 10.1 20.2
---------- ---------- --------
Earnings per share
Basic (3) 7 2.80p 2.43p 4.86p
---------- ---------- --------
Diluted (4) 7 2.72p 2.37p 4.73p
---------- ---------- --------
(1) Adjusted operating profit 4 22.9 12.6 28.5
(2) Adjusted profit before tax 4 17.6 8.8 20.1
(3) Adjusted earnings per share 7 3.53p 1.92p 4.36p
(4) Adjusted and diluted earnings
per share 7 3.43p 1.88p 4.24p
------------------------------------ --- ------- ------- -------
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2023
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2023 2022 2022
GBPm GBPm GBPm
Profit for the period 11.6 10.1 20.2
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss:
Gains/(Losses) on foreign exchange
contracts- cash flow hedges during
the period 0.8 (6.5) (4.5)
Reclassification adjustments for
losses included in profit 0.9 1.3 2.2
---------- ---------- --------
Gains/(Losses) on foreign exchange
contracts- cash flow hedges 1.7 (5.2) (2.3)
Exchange differences on translation
of overseas operations (18.3) 22.2 24.5
Tax relating to items that may
be reclassified (0.5) 1.2 0.7
---------- ---------- --------
(17.1) 18.2 22.9
Items that will not be reclassified
subsequently to profit or loss:
Actuarial losses on defined benefit
pension schemes (3.3) (15.1) (23.1)
Tax relating to items that will
not be reclassified 0.8 3.8 5.7
---------- ---------- --------
(2.5) (11.3) (17.4)
Other comprehensive (expense)/income
for the period, net of tax (19.6) 6.9 5.5
---------- ---------- --------
Total comprehensive (expense)/income
for the period (8.0) 17.0 25.7
---------- ---------- --------
Attributable to:
Equity holders of the parent (8.0) 17.0 25.7
---------- ---------- --------
Condensed Consolidated Balance Sheet
As at 30 June 2023 30 June 30 June
Notes 2023 2022 31 Dec 2022
GBPm GBPm GBPm
Non-current assets
Goodwill 8 193.2 157.1 199.7
Other intangible assets 33.6 4.3 36.2
Investment in joint venture 9 4.6 4.2 4.4
Property, plant and equipment 10 283.1 304.1 307.2
Deferred tax assets 12.2 8.7 10.9
Retirement benefits 11 48.0 58.5 51.8
Trade and other receivables 0.6 0.1 0.4
-------- -------- ------------
Total non-current assets 575.3 537.0 610.6
-------- -------- ------------
Current assets
Inventories 199.4 163.3 194.3
Current tax receivables 2.0 2.8 2.1
Trade and other receivables 147.1 133.7 126.7
Cash and bank balances 12c) 35.7 82.6 43.2
Total current assets 384.2 382.4 366.3
-------- -------- ------------
Total assets 959.5 919.4 976.9
-------- -------- ------------
Current liabilities
Trade and other payables 183.2 190.4 191.2
Current tax liabilities 18.1 15.9 17.7
Lease liabilities 12c) 11.2 11.3 12.7
Bank overdrafts and loans 12c) - 31.3 0.5
Provisions 14 16.1 12.9 16.7
Deferred and contingent consideration 36.1 - 23.4
Total current liabilities 264.7 261.8 262.2
-------- -------- ------------
Non-current liabilities
Bank and other loans 12c) 155.1 124.2 143.2
Retirement benefits 11 9.9 10.8 12.1
Deferred tax liabilities 4.7 7.0 4.7
Lease liabilities 12c) 59.9 65.2 65.7
Provisions 14 5.7 2.9 2.9
Contingent consideration 15.1 - 28.9
Others 6.2 3.2 7.8
-------- -------- ------------
Total non-current liabilities 256.6 213.3 265.3
-------- -------- ------------
Total liabilities 521.3 475.1 527.5
-------- -------- ------------
Net assets 438.2 444.3 449.4
-------- -------- ------------
Equity
Issued share capital 15 41.9 41.9 41.9
Share premium account 14.8 14.8 14.8
Equity reserve 6.3 5.5 6.4
Hedging and translation reserve 34.4 46.8 51.5
Retained earnings 351.8 342.6 346.5
Own Shares (11.0) (7.3) (11.7)
-------- -------- ------------
Equity attributable to equity
holders of the parent 438.2 444.3 449.4
-------- -------- ------------
Total equity 438.2 444.3 449.4
-------- -------- ------------
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2023
All equity is attributable to equity
holders of the parent
Issued Share
share premium Equity Hedging Translation Retained Own Total
capital account reserve reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2022 41.9 14.8 5.8 (37.2) 65.8 343.2 (9.2) 425.1
-------- -------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - - 20.2 - 20.2
Losses on foreign exchange
contracts- cash flow hedges - - - (2.3) - - - (2.3)
Exchange differences on
translation of overseas
operations - - - - 24.5 - - 24.5
Actuarial losses on defined
benefit pension schemes - - - - - (23.1) - (23.1)
Tax relating to components of
other comprehensive income - - - 0.7 - 5.7 - 6.4
-------- -------- -------- -------- ------------ --------- -------- -------
Total comprehensive
(expense)/income for the period - - - (1.6) 24.5 2.8 - 25.7
Share-based payment charge - - 4.3 - - - - 4.3
Purchase of shares held by
employee benefit trust - - - - - - (4.5) (4.5)
Use of shares held by employee
benefit trust - - - - - (2.0) 2.0 -
Transfer to retained earnings - - (3.7) - - 3.7 - -
Dividends paid - - - - - (1.2) - (1.2)
Balance at 31 December 2022 41.9 14.8 6.4 (38.8) 90.3 346.5 (11.7) 449.4
-------- -------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - - 11.6 - 11.6
Gains on foreign exchange
contracts- cash flow hedges - - - 1.7 - - - 1.7
Exchange differences on
translation of overseas
operations - - - - (18.3) - - (18.3)
Actuarial losses on defined
benefit pension schemes - - - - - (3.3) - (3.3)
Tax relating to components of
other comprehensive income - - - (0.5) - 0.8 - 0.3
-------- -------- -------- -------- ------------ --------- -------- -------
Total comprehensive
(expense)/income for the period - - - 1.2 (18.3) 9.1 - (8.0)
Share-based payment charge - - 1.4 - - - - 1.4
Tax relating to share-based
payments - - 0.4 - - - - 0.4
Purchase of shares held by
employee benefit trust - - - - - - (0.9) (0.9)
Use of shares held by employee
benefit trust - - - - - (1.6) 1.6 -
Transfer to retained earnings - - (1.9) - - 1.9 - -
Dividends paid - - - - - (4.1) - (4.1)
Balance at 30 June 2023 41.9 14.8 6.3 (37.6) 72.0 351.8 (11.0) 438.2
-------- -------- -------- -------- ------------ --------- -------- -------
All equity is attributable to equity holders
of the parent
Issued Share
share premium Equity Hedging Translation Retained Own Total
capital account reserve reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2022 41.9 14.8 5.8 (37.2) 65.8 343.2 (9.2) 425.1
-------- -------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - - 10.1 - 10.1
Losses on foreign exchange
contracts- cash flow hedges - - - (5.2) - - - (5.2)
Exchange differences on
translation of overseas
operations - - - - 22.2 - - 22.2
Actuarial losses on defined
benefit pension schemes - - - - - (15.1) - (15.1)
Tax relating to components of
other comprehensive income - - - 1.2 - 3.8 - 5.0
Total comprehensive
income/(expense) for the period - - - (4.0) 22.2 (1.2) - 17.0
Share-based payment charge - - 2.2 - - - - 2.2
Use of shares held by employee
benefit trust - - - - - (1.9) 1.9 -
Transfer to retained earnings - - (2.5) - - 2.5 - -
Balance at 30 June 2022 41.9 14.8 5.5 (41.2) 88.0 342.6 (7.3) 444.3
-------- -------- -------- -------- ------------ --------- -------- -------
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2023
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2023 2022 2022
GBPm GBPm GBPm
Net cash (used in)/ from operating
activities 12a) (1.7) 28.8 57.7
---------- ---------- --------
Investing activities
Interest received 1.9 0.1 0.7
Proceeds on disposal of property,
plant and equipment 0.1 0.1 0.5
Purchases of property, plant and
equipment (12.9) (10.9) (28.7)
Purchases of intangible assets (0.8) (0.6) (1.8)
Acquisition of Spencer 0.3 - (25.3)
Net cash used in investing activities (11.4) (11.3) (54.6)
---------- ---------- --------
Financing activities
Dividends paid (4.1) - (1.2)
New loans 84.1 13.9 90.8
Repayment of borrowings (66.8) (13.6) (90.4)
Purchase of shares held by employee
benefit trust (0.9) - (4.5)
Repayment of lease liabilities (5.0) (4.4) (9.1)
Net cash generated/(used) in financing
activities 7.3 (4.1) (14.4)
---------- ---------- --------
Net (decrease)/increase in cash
and cash equivalents (5.8) 13.4 (11.3)
Cash and cash equivalents at beginning
of period 42.7 51.1 51.1
Effect of foreign exchange rate
changes (1.2) 3.2 2.9
---------- ---------- --------
Cash and cash equivalents at end
of period 12c) 35.7 67.7 42.7
---------- ---------- --------
Notes to the Condensed Consolidated Interim Financial
Statements
1. General information
These Condensed Consolidated Interim Financial Statements of
Senior plc ("the Group"), which were approved by the Board of
Directors on 28 July 2023, have been reviewed by KPMG LLP, the
Group's auditor, whose report is set out after the Directors'
Responsibility Statement.
The comparative figures for the year ended 31 December 2022 do
not constitute the Group's statutory accounts for 2022 as defined
in Section 434(3) of the Companies Act 2006. Statutory accounts for
2022 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
Basis of preparation
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 for use by the UK.
The Annual Financial Statements of the Group for the year ended
31 December 2023 will be prepared in accordance with UK-adopted
international accounting standards. As required by the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority,
these Condensed Consolidated Interim Financial Statements have been
prepared by applying the accounting policies and presentation that
were applied in the preparation of the published Annual Financial
Statements of the Group as at and for the year ended 31 December
2022, which were prepared in accordance with UK-adopted
international accounting standards.
These Condensed Consolidated Interim Financial Statements do not
include all the information required for full Annual Financial
Statements and should be read in conjunction with the Annual
Financial Statements of the Group as at and for the year ended 31
December 2022.
Going Concern
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, being a period of at least 12
months from this reporting date (the "Going Concern Period").
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these Condensed Consolidated Interim
Financial Statements, having undertaken a rigorous assessment of
the financial forecasts.
The Board has considered projections, including severe but
plausible downsides covering a period of at least 12 months from
the date of this report based on the experiences over recent years,
including the strong trading performance in the first half of 2023
coupled with our core markets showing good growth, as outlined in
the Interim Management Report review. These projections are borne
out of extensive scenario testing, based on a variety of end market
assumptions, while taking account of appropriate mitigating actions
within the direct control of the Group.
The Group has two covenants for committed borrowing facilities,
which are tested at June and December: the Group's net debt to
EBITDA (defined in the Notes to the Financial Headlines) must not
exceed 3.0x and interest cover, the ratio of EBITDA to interest
must be higher than 3.5x. At 30 June 2023, the Group's net debt to
EBITDA was 1.6x and interest cover was 8.9x, both comfortably
within covenants limits. The Group's liquidity headroom at 30 June
2023 was GBP154.9m. For all testing periods within the Going
Concern Period, there is sufficient headroom to remain within the
covenant limits and the Group's committed borrowing facilities,
even in a severe but plausible downside scenario.
Based on the above assessment, the Board has concluded that the
Group will continue to have adequate financial resources to realise
its assets and discharge its liabilities as they fall due over the
Going Concern Period. Accordingly, the Directors have formed the
judgement that it is appropriate to prepare these Condensed
Consolidated Interim Financial Statements on the going concern
basis.
New policies and standards
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 2022, which were prepared in accordance with
UK-adopted international accounting standards.
At the date of authorisation of these Condensed Consolidated
Interim Financial Statements , several new standards and amendments
to existing standards have been issued, some of which are
effective. None of these standards and amendments have a material
impact on the Group.
The preparation of the Condensed Consolidated Interim Financial
Statements requires management to make judgments, 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. The Group's latest Annual
Financial Statements for the year ended 31 December 2022, which are
available via Senior's website www.seniorplc.com , set out the key
sources of estimation uncertainty and the critical judgements that
were made in preparing those Financial Statements.
3. Segmental analysis
The Group reports its segment information as two operating
divisions according to the market segments they serve, Aerospace
and Flexonics, which is consistent with the oversight employed by
the Executive Committee. The chief operating decision maker, as
defined by IFRS 8, is the Executive Committee. The Group is managed
on the same basis, as two operating divisions.
Business Segments
Segment information for revenue and operating profit and a
reconciliation to the Group profit after tax is presented
below:
Eliminations Eliminations
/ central / central
Aerospace Flexonics costs Total Aerospace Flexonics costs Total
Half-year Half-year Half-year Half-year Half-year Half-year Half-year Half-year
ended ended ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2023 2023 2023 2023 2022 2022 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External revenue 303.8 178.5 - 482.3 264.4 137.8 - 402.2
Inter-segment
revenue 0.3 0.1 (0.4) - 0.1 0.1 (0.2) -
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Total revenue 304.1 178.6 (0.4) 482.3 264.5 137.9 (0.2) 402.2
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted trading
profit 11.6 20.2 (9.5) 22.3 9.8 11.3 (8.6) 12.5
Share of joint
venture profit - 0.6 - 0.6 - 0.1 - 0.1
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted
operating
profit 11.6 20.8 (9.5) 22.9 9.8 11.4 (8.6) 12.6
Amortisation
of intangible
assets from
acquisitions (1.1) - - (1.1) - - - -
Net restructuring
(costs)/income (0.9) - - (0.9) 2.8 - - 2.8
US pension
settlement - - (0.1) (0.1) - - - -
Operating profit 9.6 20.8 (9.6) 20.8 12.6 11.4 (8.6) 15.4
---------- ---------- ------------ ---------- ---------- ------------
Investment income 2.9 0.7
Finance costs (9.6) (4.5)
Corporate
undertakings (0.6) (0.5)
---------- ----------
Profit before
tax 13.5 11.1
Tax charge (1.9) (1.0)
---------- ----------
Profit after
tax 11.6 10.1
---------- ----------
Trading profit and adjusted trading profit is operating profit
and adjusted operating profit respectively before share of joint
venture profit. See Note 4 for the derivation of adjusted operating
profit.
Segment information for assets and liabilities is presented
below.
30 June 30 June 31 Dec
2023 2022 2022
Assets GBPm GBPm GBPm
Aerospace 637.7 551.5 647.8
Flexonics 219.0 210.4 217.3
Segment assets for reportable segments 856.7 761.9 865.1
Unallocated
Central 4.6 4.8 3.6
Cash 35.7 82.6 43.2
Deferred and current tax 14.2 11.5 13.0
Retirement benefits 48.0 58.5 51.8
Others 0.3 0.1 0.2
-------- -------- -------
Total assets per Consolidated Balance
Sheet 959.5 919.4 976.9
-------- -------- -------
30 June 30 June 31 Dec
2023 2022 2022
Liabilities GBPm GBPm GBPm
Aerospace 173.1 179.1 189.5
Flexonics 82.8 82.4 79.7
Segment liabilities for reportable segments 255.9 261.5 269.2
Unallocated
Central 18.0 16.1 19.2
Debt 155.1 155.5 143.7
Deferred and current tax 22.8 22.9 22.4
Retirement benefits 9.9 10.8 12.1
Deferred and contingent consideration(1) 51.2 - 52.3
Others 8.4 8.3 8.6
-------- -------- -------
Total liabilities per Consolidated Balance
Sheet 521.3 475.1 527.5
-------- -------- -------
(1) Deferred and contingent consideration is related to the acquisition
of Spencer Aerospace.
Total revenue is disaggregated by market sectors as follows:
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2023 2022 2022
GBPm GBPm GBPm
Civil Aerospace 201.4 161.3 339.4
Defence 63.8 59.7 122.1
Other 38.9 43.5 92.1
---------- ---------- --------
Aerospace 304.1 264.5 553.6
Land Vehicles 104.0 75.7 164.1
Power & Energy 74.6 62.2 131.5
Flexonics 178.6 137.9 295.6
Eliminations (0.4) (0.2) (0.8)
Total revenue 482.3 402.2 848.4
---------- ---------- --------
Other Aerospace comprises space and non-military helicopters and
other markets, principally including semiconductor, medical, and
industrial applications.
4. Adjusted operating profit and adjusted profit before tax
The presentation of adjusted operating profit and adjusted
profit before tax measures, derived in accordance with the table
below, has been included to identify the performance of the Group
prior to the impact of amortisation of intangible assets from
acquisitions, net restructuring cost/income and the costs
associated with US pension settlement and corporate undertakings.
The adjustments are made on a consistent basis and also reflect how
the business is managed on a day-to-day basis.
The amortisation charge relates to the acquisition of Spencer
Aerospace. It is charged on a straight-line basis and reflects a
non-cash item for the reported year. The Group implemented a
restructuring programme in 2019, which continued through 2020 and
into 2022 in response to the impact of the COVID-19 pandemic on
some of the Group's end markets. Some residual restructuring
activity has continued in 2023. The aerospace manufacturing grant,
within net restructuring income, represents incentives specific to
only part of the Group for a limited time period. The US pension
settlement relates to partial closure of a US defined benefit
scheme in H1 2023. Corporate undertakings relate to business
acquisition activities. None of these charges are reflective of in
year performance. Therefore, they are excluded by the Board and
Executive Committee when measuring the operating performance of the
businesses.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2023 2022 2022
GBPm GBPm GBPm
Operating profit 20.8 15.4 32.5
Amortisation of intangible assets from
acquisitions 1.1 - 0.2
Net restructuring cost/(income) 0.9 (2.8) (4.2)
US pension settlement 0.1 - -
Adjusted operating profit 22.9 12.6 28.5
---------- ---------- --------
Profit before tax
rofit before tax 13.5 11.1 22.4
Adjustments to profit before tax as
above 2.1 (2.8) (4.0)
------------------------------------------ ---------- ---------- --------
Corporate undertakings 0.6 0.5 1.4
Corporate undertakings - discount unwind 1.4 - 0.3
------------------------------------------ ---------- ---------- --------
Total Corporate undertakings 2.0 0.5 1.7
Adjusted profit before tax 17.6 8.8 20.1
---------- ---------- --------
Net restructuring cost/income
In 2020 the Group had focused on taking actions to conserve cash
to manage through the pandemic, including curtailing capital
expenditure, tightly managing working capital and implementing
further cost cutting actions. In 2023 there were still some
residual activities associated with that. In addition, the Group
has continued to review inventory exposures from programmes which
were reduced and identified some residual impairments on inventory
where there is no alternate use.
The restructuring resulted in net cost of GBP0.9m (H1 2022 -
GBP2.8m net income). Of this, GBP0.5m related to consultancy and
other activities (H1 2022 - GBP0.8m). For certain specific
programmes in conjunction with restructuring, management also
identified some residual inventory impairments of GBP0.4m (H1 2022
- GBP1.5m reversal). In the first half of 2022, impairment
provisions on property, plant and equipment were incurred with a
charge of GBP1.3m and GBP3.4m income was recognised in relation to
an aerospace manufacturing grant.
Net cash outflow related to restructuring activities was GBP0.6m
(H1 2022 - GBP1.3m net cash outflow). At 30 June 2023, a
restructuring provision of GBP0.1m (30 June 2022: GBP0.9m; 31
December 2022: GBP0.2m) was recognised and is expected to be
utilised in 2023.
US pension settlement
One of the US defined benefit plans was partially settled in the
first half of 2023 following a combination of lump sum payments and
annuity purchase. A net expense of GBP0.1m, recognised as an
adjusting item to operating profit, and cash outflow of GBP0.8m was
recorded in the first half of 2023 in relation to this
settlement.
Corporate undertakings
In the half-year ended 30 June 2023, the Group recorded GBP2.0m
costs related to the acquisition of Spencer, of which GBP1.4m is
unwinding of discount on deferred and contingent consideration and
GBP0.6m is unwind of initial fair value uplift and other corporate
costs (Half year ended 30 June 2022: GBP0.3m costs related to the
acquisition of Spencer Aerospace and GBP0.2m costs relating to
other corporate activities). See note 13 for further details.
5. Tax charge
Half-year Half-year
ended ended
30 June 30 June
2023 2022
GBPm GBPm
Current tax:
Current year charge 3.0 2.1
Irrecoverable withholding tax 0.2 0.2
Prior year items - (0.2)
---------- ----------
3.2 2.1
Deferred tax:
Current year charge (1.3) (0.9)
Prior year items - (0.2)
---------- ----------
(1.3) (1.1)
Total tax charge 1.9 1.0
---------- ----------
Tax for the half-year ended 30 June 2023 is calculated at 14.1%
(H1 2022: 9.0%) on the profit before tax, representing the
half-year allocation of the estimated weighted average annual tax
rate expected for the full financial year in accordance with IAS
34. The estimated tax rate is weighted to reflect the tax impact of
significant events taking place during the interim period.
As a result of the substantial enactment on 24 May 2022 of a
change in UK tax rate from 19% to 25% effective from 1 April 2023,
an effective tax rate of 23.5% has been applied to UK profits in
the period. A deferred tax credit has also been recognised in the
Statement of Comprehensive Income to state UK deferred tax balances
at the future rate of 25%.
The group is paying close attention to proposals under Pillar 2
of the OECD's Base Erosion Profit Shifting (BEPS) project and the
impact this may have on the group's future tax position. Pillar 2
rules were substantively enacted in the UK on 20 June 2023, with
application from 1 January 2024. The Group does not consider that
these rules are likely to have a significant impact on its tax
position.
We have applied the guidance contained in International Tax
Reform - Pillar Two Model Rules (Amendments to IAS 12) released on
23 May 2023 that provides for a temporary mandatory exception from
deferred tax accounting for Pillar 2.
6. Dividends
Half-year Half-year
ended ended
30 June 30 June
2023 2022
GBPm GBPm
Amounts recognised as distribution to equity holders
in the period:
Final dividend for the year ended 31 December
2022 of 1.00p per share
(2021: nil p) 4.1 -
---------- ----------
Interim dividend for the year ending 31 December
2023 of 0.60p per share (2022: 0.30p) per share 2.5 1.2
---------- ----------
The interim dividend was approved by the Board of Directors on
28 July 2023 and has not been included as a liability in these
Condensed Consolidated 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
2023 2022
Number of shares million million
Weighted average number of ordinary shares for
the purposes of basic earnings per share 413.9 416.4
Effect of dilutive potential ordinary shares:
Share options 12.2 10.1
---------- ----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 426.1 426.5
---------- ----------
Half-year Half-year Half-year Half-year
ended ended ended ended
30 June 30 June 30 June 30 June
2023 2023 2022 2022
Earnings EPS Earnings EPS
Earnings and earnings per share
("EPS") GBPm Pence GBPm Pence
Profit for the period 11.6 2.80 10.1 2.43
Adjust:
Amortisation of intangible
assets from acquisitions net
of tax credit of GBP0.3m (H1
2022 - GBPnil) 0.8 0.20 - -
Net restructuring cost/(income)
net of tax of tax credit of
GBP0.3m (H1 2022: GBP0.3m) 0.6 0.15 (2.5) (0.61)
US pension settlement net of
tax of GBPnil (H1 2022: GBPnil) 0.1 0.02 - -
Corporate undertakings net
of tax credit of GBP0.5m (H1
2022: GBP0.1m) 1.5 0.36 0.4 0.10
Adjusted earnings after tax 14.6 3.53 8.0 1.92
---------- ---------- ---------- ----------
Earnings per share
- basic 2.80p 2.43p
- diluted 2.72p 2.37p
- adjusted 3.53p 1.92p
- adjusted and diluted 3.43p 1.88p
The denominators used for all basic, diluted and adjusted
earnings per share are as detailed in the table above.
The presentation of adjusted earnings per share, derived in
accordance with the table above, has been included to identify the
performance of the Group prior to the impact of amortisation of
intangible assets from acquisitions, net restructuring cost/income,
US pension settlement and corporate undertakings (See Note 4 for
further details).
The impact of these items have been excluded from adjusted
earnings after tax and adjusted earnings per share in line with the
Board adopted policy to separately disclose those items, where
significant in size, that it considers are outside the earnings for
the particular year under review and against which the Board
measures and assesses the performance of the business.
8. Goodwill
The change in goodwill from GBP199.7m at 31 December 2022 to
GBP193.2m at 30 June 2023 reflects a decrease of GBP6.5m due to
foreign exchange differences.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. No such indicators have been identified at 30 June
2023.
9. Investment in joint venture
The Group has a 49% interest in Senior Flexonics Technologies
(Wuhan) Limited, a jointly controlled entity incorporated in China.
The Group's investment of GBP4.6m (30 June 2022: GBP4.2m; 31
December 2022: GBP4.4m) represents the Group's share of the joint
venture's net assets as at 30 June 2023.
10. Property, plant and equipment
During the period, the Group invested GBP12.9m (H1 2022:
GBP10.9m) in the acquisition of property, plant and equipment
(excluding right-of-use assets). The Group also disposed of
machinery with a carrying value of GBPnil (H1 2022: GBPnil) for
proceeds of GBP0.1m (H1 2022: GBP0.1m).
At 30 June 2023, right-of-use assets were GBP63.8m (30 June
2022: GBP69.6m; 31 December 2022: GBP70.8m). Right-of-use asset
depreciation was GBP5.3m for the six months ending 30 June 2023 (H1
2022: GBP5.1m).
11. Retirement benefit schemes
Aggregate retirement benefit liabilities of GBP9.9m (30 June
2022: GBP10.8m; 31 December 2022: 12.1m) comprise the Group's US
defined benefit pension funded schemes with a total deficit of
GBP4.7m (30 June 2022: GBP5.0m; 31 December 2022: GBP6.7m) and
other unfunded schemes, with a deficit of GBP5.2m (30 June 2022:
GBP5.8m; 31 December 2022 : GBP5.4m).
During the first half of 2023, one of the US defined benefit
plans was partially settled following a combination of lump sum
payments and annuity purchase. A net expense of GBP0.1m, recognised
as an adjusting item to operating profit (see Note 4), and cash
outflow of GBP0.8m (see Note 12b) was recorded in the first half of
2023 in relation to this settlement.
The retirement benefit surplus of GBP48.0m (30 June 2022:
GBP58.5m; 31 December 2022: GBP51.8m) 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
2023 2022
GBPm GBPm
Operating profit 20.8 15.4
Adjustments for:
Depreciation of property, plant and equipment 24.2 23.7
Amortisation of intangible assets 1.9 0.8
Share of joint venture (0.6) (0.1)
Share-based payment charges 1.4 2.2
Profit on sale of fixed assets (0.1) (0.1)
Pension contributions (0.3) (2.3)
Pension service and running costs 0.7 0.7
Corporate undertaking costs (0.2) (0.5)
Increase in inventories (14.1) (7.3)
Increase in receivables (25.6) (27.9)
Increase in payables and provisions 1.5 28.6
Restructuring impairment of property, plant and
equipment - 1.3
US pension settlement (0.7) -
Working capital and provisions currency movements (0.3) 0.2
Cash generated by operations 8.6 34.7
Income taxes paid (2.4) (1.7)
Interest paid (7.9) (4.2)
---------- ----------
Net cash from operating activities (1.7) 28.8
---------- ----------
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 corporate undertakings, net restructuring cash
flows, US pension settlement cash flows, financing and transactions
with shareholders. It is derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2023 2022
GBPm GBPm
Net cash from operating activities (1.7) 28.8
Corporate undertaking costs 0.2 0.5
Net restructuring cash paid 0.6 1.3
US pension settlement cash paid 0.8 -
Interest received 1.9 0.1
Proceeds on disposal of property, plant and equipment 0.1 0.1
Purchases of property, plant and equipment (12.9) (10.9)
Purchase of intangible assets (0.8) (0.6)
------------ ----------
Free cash flow (11.8) 19.3
------------ ----------
At At
c) Analysis of net 1 January Net Cash Exchange Other Lease 30 June
debt 2023 flow movement Movements 2023
GBPm GBPm GBPm GBPm GBPm
Cash and bank balances 43.2 (6.3) (1.2) - 35.7
Overdrafts (0.5) 0.5 - - -
----------- -------- ------------ ------------ ----------
Cash and cash equivalents 42.7 (5.8) (1.2) - 35.7
Debt due within one
year - - - - -
Debt due after one
year (143.2) (17.3) 5.4 - (155.1)
Lease liabilities (1) (78.4) 5.0 4.7 (2.4) (71.1)
Liabilities arising
from financing activities (221.6) (12.3) 10.1 (2.4) (226.2)
----------- -------- ------------ ------------ ----------
Total (178.9) (18.1) 8.9 (2.4) (190.5)
----------- -------- ------------ ------------ ----------
(1) The change in lease liabilities in the six months ended 30 June
2023 includes lease rental payments of GBP6.5m (GBP1.5m of these
payments relates to lease interest), GBP4.7m exchange movement
and GBP2.4m other movements related to lease additions and modifications.
Half-year Half-year
ended ended
30 June 30 June
2023 2022
Cash and Cash equivalents comprise: GBPm GBPm
Cash and bank balances 35.7 82.6
Overdrafts - (14.9)
---------- ----------
Total 35.7 67.7
---------- ----------
d) Analysis of working capital and provisions
Working capital comprises the following:
Half-year Half-year
ended ended
30 June 30 June
2023 2022
GBPm GBPm
Inventories 199.4 163.3
Trade and other receivables 147.1 133.7
Trade and other payables (183.2) (190.4)
---------- ----------
Working capital, including derivatives 163.3 106.6
Items excluded:
Foreign exchange contracts 0.5 8.8
Total 163.8 115.4
---------- ----------
Working capital and provisions movement, net of restructuring
items, a non-statutory cash flow item, is derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2023 2022
GBPm GBPm
Increase in inventories (14.1) (7.3)
Increase in receivables (25.6) (27.9)
Increase in payables and provisions 1.5 28.6
---------- ----------
Working capital and provisions movement, excluding
currency effects (38.2) (6.6)
Items excluded:
(Increase)/Decrease in restructuring related inventory
impairment (0.4) 1.5
Decrease in net restructuring provision and other
receivables 0.1 3.9
Total (38.5) (1.2)
---------- ----------
13. Acquisition activities
In the prior year, the Group signed a definitive agreement to
acquire substantially all of the assets of Spencer Aerospace
Manufacturing, LLC, a leading manufacturer of highly engineered,
high-pressure hydraulic fluid fittings for use in commercial and
military aerospace applications. The acquisition was completed in
Q4 2022.
In the first half of 2023, GBP2.0m costs were recognised as an
adjusting item to profit before tax (see Note 4) in relation to
unwinding of discount on deferred and contingent consideration
(GBP1.4m), unwind of initial fair value uplift at acquisition date
(GBP0.4m) and other acquisition costs (GBP0.2m). A net cash inflow
of GBP0.1m was recorded, being a working capital consideration
adjustment receipt of GBP0.3m, partially offset by the cash effect
of other acquisition costs. In the half year ended 30 June 2022,
the Group recorded GBP0.3m costs related to the acquisition of
Spencer Aerospace and GBP0.2m costs relating to other corporate
activities, which were also cash outflows.
14. Provisions
Current and non-current provisions include warranty costs of
GBP16.8m (30 June 2022: GBP8.9m; 31 December 2022: GBP10.8m),
restructuring of GBP0.1m (30 June 2022: GBP0.9m; 31 December 2022:
GBP0.2m) and other provisions including contractual matters, claims
and legal costs that arise in the ordinary course of business of
GBP4.9m (30 June 2022: GBP6.0m; 31 December 2022: GBP8.6m).
15. Share capital
Share capital as at 30 June 2023 amounted to GBP41.9m (30 June
2022: GBP41.9m, 31 December 2022: GBP41.9m). No shares were issued
during the period.
16. Contingent liabilities
The Group is subject to various claims which arise from time to
time in the course of its business including, for example, in
relation to commercial matters, product quality or liability, and
tax audits. Where the Board has assessed there to be a more likely
than not outflow of economic benefits, provision has been made for
the best estimate as at 30 June 2023 (see Note 14). For all other
matters, the Board has concluded that it is not more likely than
not that there will be an economic outflow of benefits. While the
outcome of some of these matters cannot be predicted with any
certainty, the Directors do not expect any of these arrangements,
legal actions or claims, after allowing for provisions already made
where appropriate, to result in significant loss to the Group.
17. Related party transaction
Barbara Jeremiah, Senior Independent Non-Executive Director and
Chair of the Remuneration Committee was appointed a non-executive
director of Johnson Matthey Plc with effect from 1 July 2023.
Johnson Matthey Plc, a related party of the Group, has been renting
excess car parking space from one of the Group's operating
businesses on a rolling monthly basis. The lease contract was in
place prior to the acquisition of Thermal Engineering in 2013 by
the Group. In the first six months of 2023, GBP0.04m car park
rental was received (Half year ended 30 June 2022: GBP0.04m). There
are no outstanding amounts at 30 June 2023 (30 June 2022:
GBPnil).
The Group has also related party relationships with a number of
pension schemes (see Note 11) and with Directors and Senior
Managers of the Group.
18. Financial Instruments
Categories of financial instruments
Half-year Half-year
ended ended
30 June 30 June
2023 2022
GBPm GBPm
Carrying value of financial assets:
Cash and bank balances 35.7 82.6
Trade receivables 129.5 115.3
Other receivables 0.2 0.7
---------- ----------
Financial assets at amortised cost 165.4 198.6
---------- ----------
Foreign exchange contracts- cash flow hedges 3.2 1.4
Total financial assets 168.6 200.0
---------- ----------
Carrying value of financial liabilities:
Bank overdrafts and loans 155.1 155.5
Lease liabilities 71.1 76.5
Trade payables 98.4 101.4
Deferred consideration 23.0 -
Other payables 56.0 58.5
---------- ----------
Financial liabilities at amortised cost 403.6 391.9
---------- ----------
Contingent Consideration - fair value through
profit or loss 28.2 -
Foreign exchange contracts- cash flow hedges 6.8 10.2
Foreign exchange contracts- held for trading 0.1 -
---------- ----------
Total financial liabilities 438.7 402.1
---------- ----------
Half-year Half-year
ended ended
30 June 30 June
2023 2022
GBPm GBPm
Undiscounted contractual maturity of financial
liabilities at amortised cost:
Amounts payable:
On demand or within one year 196.3 206.3
In the second to fifth years inclusive 178.7 148.0
After five years 72.7 83.1
---------- ----------
447.7 437.4
Less: future finance charges (44.1) (45.5)
---------- ----------
Financial liabilities at amortised cost 403.6 391.9
---------- ----------
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 GBP145.8m (30 June 2022: GBP148.6m). 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 either level
2 or level 3. Level 2 are those fair values which are 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). Level 3 are those fair values which are
derived from valuation techniques that include inputs for the asset
or liability that are not based on observable market data
(unobservable inputs). There has not been any transfer of assets or
liabilities between levels. There are no non-recurring fair value
measurements.
Half-year ended Level 1 Level 2 Level 3 Total
30 June 2023 GBPm GBPm GBPm GBPm
-------- ------- -------- -----
Assets
Foreign exchange contracts
- cash flow hedges - 3.2 - 3.2
------- ------- -------- -----
Total assets - 3.2 - 3.2
------- ------- -------- -----
Liabilities
Contingent consideration
- fair value through profit
or loss - - 28.2 28.2
Foreign exchange contracts
- cash flow hedges - 6.8 - 6.8
Foreign exchange contracts
- held for trading - 0.1 - 0.1
------- ------- -------- -----
Total liabilities - 6.9 28.2 35.1
------- ------- -------- -----
Half-year ended Level 1 Level 2 Level 3 Total
30 June 2022 GBPm GBPm GBPm GBPm
-------- ------- -------- -----
Assets
Foreign exchange contracts
- cash flow hedges - 1.4 - 1.4
------- ------- -------- -----
Total assets - 1.4 - 1.4
------- ------- -------- -----
Liabilities
Foreign exchange contracts
- cash flow hedges - 10.2 - 10.2
Total liabilities - 10.2 - 10.2
------- ------- -------- -----
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END
IR BRGDRDUDDGXI
(END) Dow Jones Newswires
July 31, 2023 02:00 ET (06:00 GMT)
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