Final Results
Senior PLC
06 March 2003
Thursday 6 March 2003
Senior plc
Results for the year ended 31 December 2002
HIGHLIGHTS Year ended 31 December
2002 2001
TURNOVER FROM CONTINUING OPERATIONS £398.7m £444.3m
OPERATING PROFIT FROM CONTINUING OPERATIONS
- BEFORE EXCEPTIONAL ITEMS AND GOODWILL AMORTISATION £24.7m £34.0m
- AFTER EXCEPTIONAL ITEMS AND GOODWILL AMORTISATION £17.6m £21.0m
PROFIT BEFORE TAXATION £7.0m £9.5m
FREE CASH FLOW £25.2m £28.6m
NET BORROWINGS £87.4m £122.7m
UNDERLYING EARNINGS PER SHARE 4.47p 5.51p
DIVIDENDS PER SHARE 2.00p 2.00p
Commenting on the results, James Kerr-Muir, Chairman of Senior plc, said:
'Despite difficult trading conditions, the Group delivered a resilient
performance during 2002 and again substantially reduced debt. We expect 2003 to
be another challenging year with manufacturing recession and political
uncertainty continuing. Nevertheless, Senior is operationally in much better
condition to deal with this period of uncertainty and the lower debt level
allows the Group to look forward to the future with renewed confidence.'
For further information please contact:
Senior plc
Graham Menzies, Group Chief Executive 01923 714702
Mark Rollins, Group Finance Director 01923 714738
Finsbury Group
Charlotte Hepburne - Scott /Gordon Simpson 020 7251 3801
Internet users will be able to view this announcement on the web site:
www.seniorplc.com
Note to Editors:
Senior is an international engineering group with annual sales of around £400m
and with operations in 12 countries. Senior designs, manufactures and markets
high technology components and systems for the principal original equipment
producers in the worldwide aerospace, automotive and specialised industrial
markets. Senior's policy is to enhance shareholder value by improving operating
performance and customer service levels and by developing its market positions
in the aerospace and automotive industries.
CHAIRMAN'S STATEMENT
During the course of 2002, the Group faced frequent changes to customer
requirements, particularly in the civil aerospace market where the industry
adjusted demand levels downwards throughout the year. This was in addition to
the recessionary environment experienced in most parts of our business.
Nevertheless, the Group continued to implement improvements in the operational
aspects of the business and emerged in better managerial order at the end of the
year. In addition, and very importantly, the Group net debt was reduced from
£122.7m at the beginning of 2002 to £87.4m at the end - a 29% drop in a
difficult trading year and firm evidence of the quality of the underlying
businesses and the improving financial position of the Group.
Financial Headlines
Group turnover from continuing operations fell 10.3% in the year to £398.7m and
operating profit from continuing operations before goodwill amortisation and
exceptional items declined from £34.0m to £24.7m. Group profit before tax
declined from £9.5m to £7.0m resulting in underlying earnings per share of 4.47p
(2001 - 5.51p).
Operations
Aerospace sales dropped by 16.4% in 2002 to £164.6m, (2001 - £196.8m), as the
full year impact of reduced demand from the civil market was seen. This was
mitigated to some extent by improved demand from the military and defence
sectors. Operating profits before goodwill amortisation and exceptional items,
which had dropped sharply in the first half, recovered a little in the second
half to end the year at £8.4m (2001 - £18.0m).
Sales in the Automotive Division declined by 7.2% to £148.4m (2001 - £160.0m).
This was primarily due to some of our product programmes in North America coming
to an end. Operating profits before goodwill amortisation and exceptional items
were £12.7m (2001 - £12.8m) with an operating margin, on this basis, of 8.6%
(2001 - 8.0%).
The Specialised Industrial Division recorded sales of £86.1m (2001 - £88.5m).
The operating margin, before goodwill amortisation and exceptional items,
improved from 3.6% to 4.2% with the associated operating profits ahead by 12.5%
to £3.6m.
These results are stated before £1.3m (2001 - £2.9m) of costs incurred on
reorganisation programmes to deal with the adverse market conditions.
During the year the Group disposed of its four European expansion joint
operations with the proceeds contributing to the debt reduction.
Dividend
In 2001, dividend levels were amended to bring the dividend cover back to a more
appropriate level for the business. In line with this policy the Board is
recommending a final dividend of 1.35p per share in respect of 2002, bringing
the total dividend for the year to 2.00p per share (2001 - 2.00p).
Employees and the Board
During the year, Mike Sheppard joined the Board, having worked as an executive
within Senior for a number of years. Mike is the chief executive of the
Automotive Division and the North American Industrial operations. He is a US
citizen and works out of Chicago. Having been elected by the Board during the
year he will stand for re-election by the shareholders at the forthcoming Annual
General Meeting.
Richard Turner, who has been a non executive director of Senior since 1996 has
agreed to a further two year term until July 2004 and offers himself for
re-election by the shareholders at the Annual General Meeting. During 2002,
Richard was awarded the CMG in the Queen's Birthday Honours list and the Group
congratulates him upon his award.
During 2002 employee numbers were reduced to bring capacity in line with demand
and many operational changes and improvements were implemented. In this tough
and uncertain period, and throughout all the necessary changes, there has been
unstinting enthusiasm and support from our employees, for which we thank them.
Outlook
It is hoped that the rescheduling of aerospace orders was largely completed in
2002. 2003 has started with a more settled outlook, albeit at this lower level
of demand, but at levels that have been planned for by the operations. Barring
further market deterioration, we expect some modest recovery in our aerospace
performance, helped by new programmes starting volume production and the
benefits of operational improvements coming through.
Senior Automotive will be impacted by two programme conclusions in 2003 and
automotive production volumes in North America and Europe are softening. We
remain cautious on the outlook. In Specialised Industrial, trading conditions
in North America are reasonable although those in Europe are generally more
difficult.
We expect 2003 to be another challenging year with manufacturing recession and
political uncertainty continuing. Nevertheless, Senior is operationally in much
better condition to deal with this period of uncertainty and the lower debt
level allows the Group to look forward to the future with renewed confidence.
CHIEF EXECUTIVE'S REVIEW
The improvement strategy, adopted in 2000 and pursued during 2001, continued
unabated during 2002. We worked on improving operational performance in all
respects and irrespective of the generally lower level of customer demand. We
kept our central costs low and delivered lower costs and reduced working capital
in the subsidiaries. We continued to effect disposals amongst the European
industrial businesses and most importantly, we again reduced the Group net debt
which ended the year at £87.4m, a reduction of 29% in the year and a reduction
of nearly 50% from when the debt reduction programme started in May 2000.
Gross capital expenditure in the year was reduced to 74% of depreciation.
However, necessary and justifiable investment was maintained. Indeed, two new
factories were opened in the year to relocate Senior Aerospace BWT and Senior
Aerospace Ermeto into modern efficient factories.
During the course of the year, manufacturing recessionary influences became more
obvious in most of the developed, industrialised world. Economic conditions in
Germany were particularly weak throughout 2002 with those in the rest of
continental Europe and the USA weakening during the period. Canada and, to a
lesser extent, the UK were relatively buoyant.
The global airline industry continued to react adversely to the economic
slowdown and the threat of international terrorism. Whilst there was some
recovery in traffic volumes during 2002, airline profitability, particularly in
the USA, remains very poor. As a consequence, the major suppliers to the
airlines - the aircraft and engine builders who are our customers - continued to
adjust their production schedules downwards throughout 2002. Hopefully 2003 will
see more settled levels of demand.
Senior Automotive encountered mixed market conditions. In Europe, the overall
demand for vehicles fell by about 3% but the proportion of diesel engine
vehicles continued to climb. In the USA, demand remained higher than we had
originally expected primarily because of dealer incentives and cheap financing.
As a result vehicle sales remained at healthy levels (16.8m cars and light
trucks) and importantly, dealer stocks of vehicles were at the same level in
December 2002 as they were in December 2001 - 59 days. Destocking in 2003 should
not, therefore, be a significant issue although demand levels are expected to
show declines over 2002.
In the industrial markets in which we participate, UK construction was
satisfactory, semi conductor equipment continued to be severely depressed, oil
and gas was slightly better than expected, power generation started well but
finished weaker and process plant (e.g. chemicals and steel) remained tough.
Prospects
We enter 2003, with many business opportunities. In aerospace, the joint strike
fighter programme (JSF) at Lockheed Martin is gathering momentum with many of
our operations being involved, as they are with the new large Airbus A380. In
automotive, volume increases are being seen in our South Africa facility and, in
the longer term, diesel engine performance is beginning to attract more interest
in the USA, the common rail system having transformed the diesel engine's
fortunes in Europe.
Throughout the operations, we continue to seek operational performance and
management improvements in all areas - lean production, more effective design
and rigorous financial routines. Whilst we plan to continue our existing
policies and strategies throughout 2003, now the debt level is much lower, we
can look forward to being able to review these in the medium term in order to
take better advantage of the economic upturn when it comes.
Our employees have made valuable contributions during another period of
challenge and change and as an acknowledgement of the part they have played the
annual report features a selection of the men and women of our organisation, in
addition to the hardware traditionally highlighted.
AEROSPACE
Demand continued to slow during the year and all operations experienced
rescheduling by customers resulting, almost without exception, in lower volumes.
Consequently, many capacity adjustments needed to be made. The operations
responded well to these circumstances.
Metal Bellows, which specialises in edge-welded bellows applications, primarily
for infinite-life low-maintenance pumps, accumulators and reservoirs, performed
exceptionally well despite the semi conductor industry failing to recover. They
were helped by an increase in defence and military spending. During the year,
medical application volumes increased, installation of a new business computer
system began and design engineering proposals were made for substantial work on
JSF.
In San Diego, California, Senior Aerospace has two machine shops making
structural parts for civil and military jet engines as well as the engine
mountings into the nacelles on the aeroplanes. At Ketema, the two main
customers both adjusted schedules downwards and the company suffered
considerable disruption as a result. By the last quarter of the year, however,
a degree of stability had returned. At Jet Products, volumes came down
significantly, primarily as a result of the Boeing 737 build-rate being halved.
As a result of the need to reduce capacity, its small feeder factory was closed
and the operations moved into the main facility. Towards the end of the year,
the managements of Ketema and Jet Products were amalgamated, not only as a cost
reduction measure, but also to instil the very highest standards of
manufacturing excellence necessary to profitably meet the demands of this sector
of the market. These two operations enter 2003 in good operational shape and
with demand slightly ahead of plan.
In France, Ermeto moved out of five old buildings into one new modern facility.
The prospects for the company continue to be encouraging and it was one of the
few operations to grow its sales during the year. At Calorstat, an
unsatisfactory loss in 2001 was replaced by a breakeven trading result in 2002
as a result of the cost reduction measures taken. 2003 has an improved outlook
as new business from Airbus is in production.
Bosman, in Holland, had an eventful year with the rebuilding of the main
assembly hall (following the roof collapse in 2001), reductions in customer
schedules and a major reduction in its airline repair business. To counter this
the company successfully developed aftermarket business for the industrial gas
turbine sector. The company ended the year with an encouraging orderbook for
2003.
Senior Aerospace has two composite ducting businesses, BWT in the UK and
Composites in the USA. BWT suffered a substantial schedule downturn from its
main customer, Bombardier, which coincided with BWT moving into a new facility.
Together with Composites, BWT is working on the design and development of the
cockpit ducting system for the A380, the costs of which are being expensed as
incurrred. It is expected that this work will be finished early in 2003. As a
result of the relationship on this programme, additional work with Airbus may be
secured. Composites had a solid order book throughout 2002 and despite a small
reduction in sales over 2001, increased its profit. The key to this was a full
year deployment of lean manufacturing techniques. However, their biggest
customer, Cessna recently reduced its schedules for 2003.
At Bird Bellows, in the UK, a modest reduction in sales for the year was
accompanied by a similarly modest reduction in profitability. This company is
the sole supplier to Airbus for the flexible wing duct joints and has been
nominated for the A380 programme.
At SSP, in Los Angeles, schedules strengthened helped by the ramp up of the
Rolls-Royce Trent 500 programme and the higher levels of spending on military
programmes by the US Government. The financial performance of the company
improved and is expected to improve further in 2003. This company is an
industry leader in high temperature ducting system design. Modernisation of the
existing leasehold facility is anticipated to begin during 2003.
Throughout Senior Aerospace, improvements in on-time delivery and inventory
turns have been delivered as a result of the strategy to improve operational
effectiveness. Further improvements are expected. Capital expenditure for the
Division is likely to be significantly less than depreciation in 2003 because,
with the industry in the doldrums, the Division needs little additional
capacity. However, few programmes in the industry have been cancelled and the
sales and engineering staff have remained busy. The principal exception to this
was Fairchild Dornier's receivership, when the FD728 development was halted and
we had to write off £0.3m. Due to our continued engineering activity we do not
expect to lose market share whilst the industry awaits an upturn. Instead, we
expect to win additional future programmes to allow us to grow again when
confidence returns to the aerospace industry.
AUTOMOTIVE
Senior Automotive operates in two main markets - North America and Europe.
Demand in the USA was slightly higher than expected during 2002 and continued to
defy the slowing economy throughout the year. Incentives offered by the vehicle
manufacturers substantially helped to maintain demand and 2002 ended with modest
stocks. In Europe, 2002 saw a 3% fall in overall demand and 2003 is anticipated
to be flat at best. Overall we are cautious about economic conditions for 2003.
Helped by better than expected demand, Senior Automotive Bartlett, located near
Chicago, had a good year with profit and cash flow ahead of plan. Development
work on a number of new products continued with a variety of customers. In
particular, prototype work has begun on components for common rail diesel
engines for vehicles destined for the North American market. This significant
development could lead to substantial new business in the future. However, the
flexible exhaust connectors for one programme that only commenced shipment in
early 2002 has now been removed from the vehicles. This will make the
operation's performance difficult to repeat in 2003.
At Senior Automotive Blois, in France, performance improved in 2002 over 2001
but not yet to a satisfactory level. Management strengthening and ongoing
product rationalisation should enable the business to make further progress in
2003. The demand for common rail diesel engine fuel system components is strong
and development work on complete systems continues. We have a technical
leadership inherent in this operation which is not yet reflected in its
performance.
2002 was the first full year of production at the new greenfield site in Olomouc
in the Czech Republic. Disappointingly, the plant did not come into profit as
planned in 2002 but it should do in 2003 when further products are transferred
from Blois and a new third party programme launches mid-way through the year.
Senior Automotive Kassel traded in very weak markets - all current production
goes to the industrial sector, primarily the German chemical and solar heating
industries - and the operations recorded an unsatisfactory result. Cost
reduction measures are being taken. Progress is being made, however, in
developing German automotive component business for the future with several
promising development programmes underway for heavy truck and fuel control
applications, using the Group's hose and bellows technologies.
In Brazil, at Senior Automotive Sao Paulo, 2002 turned out to be a better year
than 2001, thanks to the cost reduction measures taken in 2001 and a more stable
economy. The second half of 2002 was particularly strong as a result of some
large industrial projects being completed, shipped and invoiced.
Senior Automotive New Delhi made good progress in 2002 and produced another
strong performance. The company has continued to win new work for the Indian
car assembly market whilst maintaining its supply of aftermarket components to
Asia, Europe and the USA.
At Senior Automotive Crumlin, 2002 was the second year of change with the
product mix moving away from exhaust flexible connectors and more towards
exhaust gas control mechanisms. Like Bartlett, new product development is a
priority.
In South Africa, Senior Automotive Cape Town grew its sales by 48% as a result
of the new product lines introduced in 2001 and 2002. Profitability also
increased but was hampered by temporary local raw material supply problems.
Fortunately not all products specify locally sourced stainless steel. In 2003
it is planned that a new and much larger factory will be commissioned, close to
the existing facility, to cope with substantial new business, particularly from
Peugeot. We expect to invest around £1.5m in this business during 2003.
Whilst the automotive industry continues to build a similar number of vehicles,
the desire of the car assemblers for lower costs is relentless. Excellent
on-time delivery and quality standards are the norm with technical expertise and
price the differentiators. Senior Automotive, with its experienced engineering
resource, dedication to process and product development and its access to lower
cost manufacturing sites in South Africa, India, Czech Republic and Brazil is
well placed to face these challenges.
SPECIALISED INDUSTRIAL
Market conditions were mixed in this sector of our business. Europe was quite
weak, particularly in Germany, whilst Canada enjoyed strong conditions. In the
USA markets weakened as the year progressed.
The business in Canada had a strong year under new leadership and sales, profit
and cash flow all improved during 2002. The decision was taken to close a small
service factory to further improve performance. The oil and gas markets were
healthy and the Canadian steel mills, an important market sector, operated in
better market conditions than were enjoyed by steel companies in most other
parts of the world.
The hose business in Romeoville, Illinois, improved its performance but remained
a modest contributor as the semi-conductor market failed to recover.
Pathway, with operations in New Braunfels, Texas, and Oakridge, Tennessee, had
another good year despite the downturn in the USA power generation original
equipment market. The company is the world leader in the design and manufacture
of large expansion joints for process plant applications and has the physical
capacity to build the largest sizes specified. 2003 is likely to see slightly
weaker markets.
In Sweden, our Teflon hose business, Habia, generated a decent cash flow in
subdued market conditions that led to lower sales and profits.
Turnover of the three European metal hose operations, in the UK, Holland and
France, reduced a little in aggregate in subdued market conditions. Prospects
appear slightly better for 2003 primarily because of the re-equipping of the UK
gas distribution infrastructure, a strengthening position in the sea going
tanker discharge market for composite hose in Holland and due to lower costs and
a rising order book in France.
The four businesses that comprised our European expansion joint operations,
based in the UK, Denmark, Poland and the Czech Republic, were sold during 2002.
At Senior Hargreaves, 2002 started with a good quality orderbook and finished
with year on year improvement in sales, profits and cash flow. This business is
the UK market leader in the manufacture and installation of air conditioning
ducting. Looking forward the commercial construction industry is slowing,
whilst medium term opportunities are returning in nuclear decommissioning,
public service and infrastructure projects.
Overall, the Division improved its quality of earnings during 2002. Sales were
down very marginally, but the return on sales (before goodwill amortisation and
exceptional items) increased from 3.6% to 4.2% with cash inflow well ahead of
operating profit and 12% higher than in 2001. This represented a valuable
contribution to the Group's earnings and debt reduction strategy.
FINANCE DIRECTOR'S REVIEW
Financial Performance
In difficult trading conditions, group turnover from continuing operations fell
by 10.3% to £398.7m (2001 - £444.3m). Operating profit on continuing operations
after goodwill amortisation and exceptional items fell to £17.6m (2001 -
£21.0m). Profits on ordinary activities before tax were £7.0m (2001 - £9.5m).
The decline in Aerospace Divisional turnover (£27.3m on a constant currency
basis) was principally as a result of the ongoing slowdown in the Civil
Aerospace market, with the operations at Jet Products (Boeing 737 production
halved) and BWT (slow down in the regional jet market) seeing the largest
percentage declines. New vehicle production in North America held up well but,
as anticipated, the Group's automotive turnover in North America fell as
programmes ended. Outside North America, automotive turnover rose slightly as
growing diesel volumes and new programmes coming on stream in Cape Town more
than offset declines in new vehicle production in continental Europe. Turnover
in the Specialised Industrial Division, before currency effects, was broadly
unchanged. Adverse currency movements accounted for £11.2m of the total £45.6m
(10.3%) reduction in Group turnover.
On a constant currency basis, operating profits before exceptional costs and
goodwill amortisation were ahead of the prior year by £0.5m (16%) in the
Specialised Industrial Division and by £0.5m (4%) in the Automotive Division.
The latter result reflected the achievement of significant cost savings in North
America following the merging of management at two operations in late 2001.
Underlying profitability in the Aerospace Division fell by 52% (£9.1m). Adverse
currency movements further reduced the Group result by £1.2m compared with 2001.
Exceptional Items and Goodwill Amortisation
Exceptional charges for the year comprised £1.3m of reorganisation and
redundancy costs (2001 - £2.9m). These arose across a number of operations as
employee numbers were reduced in line with demand and a small aerospace
satellite factory was closed. A review of the carrying value of fixed assets
and goodwill across the Group resulted in no impairment (2001 - £4.0m). The
small reduction in the goodwill amortisation charge to £5.8m (2001 - £6.1m) was
exchange rate related.
Interest Charge
The net interest charge for the year of £6.6m was 33% lower than the prior year
(2001 - £9.8m) as a result of the significant reduction in the level of the
Group's borrowings and lower interest rates, particularly in the USA. Most of
the Group's borrowings are in US $. Interest cover, calculated on operating
profits before exceptional items and goodwill amortisation was 3.7 times (2001 -
3.5 times).
Taxation
The overall Group taxation charge of £3.1m comprised a £3.6m charge relating to
ordinary activities for the year, a net benefit of £0.1m relating to prior years
and a net reduction in deferred tax liabilities of £0.4m. The Group's effective
tax rate for 2002, measured on profit before amortisation and impairment of
goodwill and before losses on disposal was 18.5% (2001 - 23.2%). A
reconciliation of the rate for the year, between the UK corporate tax rate of
30% and the actual charge, is included in the annual accounts.
The Group had already adopted Financial Reporting Standard 19 - 'Deferred Tax'
in its 2001 results.
Earnings and Dividends per Share
Underlying earnings per share (after exceptional costs but before amortisation
and impairment of goodwill and loss on disposal of operations and fixed assets)
was 4.47p (2001 - 5.51p). As noted in the Chairman's Statement, a final
dividend of 1.35p per share is proposed to be paid on 29 May 2003 to
shareholders on the register on 2 May 2003. Together with the interim dividend
of 0.65p, total dividends paid in respect of 2002 would then be 2.00p (2001 -
2.00p).
Disposals
The Group sold its four European expansion joint businesses (located in Denmark,
Poland, the Czech Republic and the United Kingdom) during September 2002 for a
total consideration, net of costs, of £3.8m. Of this £2.8m was received in the
year. On turnover of £5.7m the operations broke-even at the profit before
interest and tax level during the period prior to disposal. A loss of £3.5m
resulted from the disposal after taking into account the write-off of £1.4m of
goodwill held on the balance sheet.
Cash Flow and Net Borrowings
Cash profits, combined with a continuing tight control of working capital and
capital expenditure, resulted in Free Cash Flow (operating cash flow from
operations after net capital expenditure, interest and tax) of £25.2m (2001 -
£28.6m). After receiving net disposal and acquisition proceeds of £2.2m and
funding £2.5m in dividends the cash generated was used to reduce the Group's
borrowings. The majority of the Group's borrowings are in US $, as a policy
hedge against the Group's US $ assets, and the weakening US $ ($1.46:£ to $1.61:
£ over the year) reduced the reported sterling borrowings by £10.4m. Overall,
the Group's net borrowings fell by £35.3m to £87.4m (2001 - £122.7m) during
2002.
2002 2001
£m £m
OPERATING PROFIT 17.6 21.3
DEPRECIATION 17.8 18.4
NET CAPITAL EXPENDITURE (INCLUDING FINANCE LEASES) (11.7) (15.6)
GOODWILL AMORTISATION AND IMPAIRMENT 5.8 10.2
WORKING CAPITAL MOVEMENT 2.7 (3.0)
NET INTEREST PAID (7.3) (9.7)
TAX RECOVERED 0.3 7.0
FREE CASH FLOW 25.2 28.6
NET DISPOSALS AND ACQUISITIONS 2.2 11.5
DIVIDENDS PAID (2.5) (15.0)
DIVIDENDS FROM ASSOCIATED UNDERTAKING - 0.2
EFFECT OF EXCHANGE RATES 10.4 (1.5)
REDUCTION IN NET BORROWINGS 35.3 23.8
NET BORROWINGS 87.4 122.7
Funding and Liquidity
The Group finances its borrowings at Group level through a multi-bank revolving
credit facility and the US private placement market. In addition it has a number
of other local banking facilities. The policy is to ensure that all projected
net borrowing requirements are covered by committed facilities. At the end of
2002 the Group had total facilities of £181m (including £160m committed) of
which £80m was unused. The maturity profile of the £87.4m of net borrowings at
the end of 2002 is:
2003 2004 2005 2006 2007 2008
£m (9.1) 32.7 0.2 0.2 15.7 47.7
net cash
Interest Rate and Currency Risk Management
In addition to funding and liquidity, the Group's main financial risks relate to
interest rate fluctuations and foreign currency exposures. The management of all
these risks is performed by a centralised treasury department which reports to
the Group Finance Director. It operates under the guidance of the Group
Treasury Committee, which meets quarterly, and acts according to the laid down
objectives, policies and authority levels approved by the Board.
It is a Group policy to have the majority of its borrowings subject to fixed
interest rates. At the year end £65.2m of private placement borrowings (weighted
average cost 7.53%), and £13.6m of other borrowings were subject to fixed rates,
thus resulting in 78% of the Group's gross debt of £101.1m being fixed interest
in nature.
The Group hedges, through currency denominated loans and forward contracts, the
majority of the exchange exposures that arise on its net investment in overseas
operations. These exchange rate movements are treated as movements on reserves
and recorded in the statement of total recognised gains and losses. Whilst the
Group does not hedge the effects of currency movements on the translation of its
overseas earnings into sterling, it does seek to cover, normally through forward
exchange contracts on a rolling 12 month basis, known transaction exposures.
Pensions
The Group has continued to account for retirement benefits in accordance with
SSAP24 and full details are disclosed in the annual accounts. The Group's main
defined benefit pension scheme is in the UK. It also has three small USA
defined benefit schemes and a range of defined contribution schemes. At the
date of the last valuation, on 6 April 2001, the UK plan's assets represented
100% of the benefits that had accrued to members after allowing for future
increases in earnings. This position has deteriorated significantly since then
as equity markets have fallen steeply. In total the Group charged £2.7m (2001 -
£1.5m) to its profit and loss account in respect of its defined benefit schemes
and £3.3m (2001 - £3.5m) in respect of its defined contribution schemes. Total
cash funding of £1.6m (2001 - £1.4m) was made in respect of all the defined
benefit schemes. Whilst the next valuation of the UK plan is not until April
2004, the Group intends to increase its funding in 2003 such that the total cash
contributions in respect of all its defined benefit schemes is anticipated to
rise by around £1.6m, to £3.2m p.a.
Although not adopted, full disclosure in accordance with FRS 17 (Retirement
Benefits) is provided as required in the annual accounts. This shows that, at
31 December 2002, there were total unprovided pension deficits, net of deferred
tax of £27.6m. Despite nearly 50% of the UK plan's assets being in bonds, which
performed well, this represents a deterioration of £22.4m in the year as equity
values fell sharply and the discount rate used to discount pension liabilities
reduced from 6.0% to 5.5%. Had the Group adopted FRS 17, then the 2002 charge
to operating profit would have been £1.9m.
Non Statutory Information
Throughout the commentary on the results a number of non statutory numbers are
quoted.
These include:
• Operating profit before exceptional items and goodwill amortisation - this
is used to illustrate the ongoing, underlying trading performance of the
Group. Note 1 provides the information to reconcile this to operating
profit.
• Underlying earnings per share - this is used to highlight the total
performance of the Group prior to the impact of goodwill amortisation and
the disposal of assets and discontinued operations. Note 3 provides the
information to reconcile this to basic earnings per share.
• Free cash flow - this is used to illustrate the total net cash generation
by the Group prior to corporate activity such as acquisitions, disposals
and dividend payments. Its derivation is fully documented earlier in this
report.
Authority to Purchase own shares
In order to provide the Group with greater future funding flexibility, the Board
intends to put a resolution to the shareholders at the forthcoming Annual
General Meeting to give the Group the authority to purchase its own shares.
Notwithstanding this resolution, the Board has no current intention of
exercising such authority.
Going Concern
After making enquiries, the directors are of the opinion that the Group has
adequate financial resources to continue to operate for the foreseeable future.
It is, therefore, appropriate for the accounts to continue to be prepared on a
going concern basis.
Senior plc
Group Profit and Loss Account
for the year ended 31 December 2002
2002 2001
Notes £m £m
Turnover
Total continuing operations 398.7 444.3
Discontinued operations 5.7 19.4
1 404.4 463.7
Operating profit before exceptional items
Continuing operations 24.7 34.0
Amortisation of goodwill (5.8) (6.1)
Total continuing operations 18.9 27.9
Discontinued operations - 0.3
18.9 28.2
Exceptional items
Reorganisation and rationalisation charges - continuing operations (1.3) (2.9)
Impairment of goodwill - (4.0)
1d) (1.3) (6.9)
Total operating profit
Continuing operations 17.6 21.0
Discontinued operations - 0.3
1 17.6 21.3
Share of operating profit in associated undertaking - 0.3
Amortisation of goodwill on associated undertaking - (0.1)
(Loss)/profit on sale of fixed assets - continuing operations (0.5) 0.1
Loss on disposal of discontinued operations (3.5) (0.8)
Loss on disposal of associated undertaking - discontinued - (1.5)
Profit on ordinary activities before interest and taxation 13.6 19.3
Other interest receivable and similar income 1.1 0.7
Interest payable and similar charges (7.7) (10.5)
Profit on ordinary activities before taxation 7.0 9.5
Tax on profit on ordinary activities (3.1) (5.1)
Profit for the financial year 3.9 4.4
Dividends 2 (6.1) (6.1)
Loss for the year (2.2) (1.7)
Earnings per share 3
Basic 1.29p 1.46p
Diluted 1.29p 1.45p
Underlying 4.47p 5.51p
Dividends per share 2 2.00p 2.00p
Senior plc
Group Balance Sheet
At 31 December 2002
Notes 2002 2001
£m £m
Fixed assets
Intangible assets - goodwill 85.8 98.4
Tangible assets 89.7 102.7
Investments 0.2 0.2
175.7 201.3
Current assets
Stocks 46.3 52.2
Debtors: Amounts falling due after more than one year 2.4 3.6
Debtors: Amounts falling due within one year 73.8 75.1
Cash at bank and in hand 9.6 14.9
132.1 145.8
Creditors: Amounts falling due within one year (86.3) (92.0)
Net current assets 45.8 53.8
Total assets less current liabilities 221.5 255.1
Creditors: Amounts falling due after more than one year (97.5) (127.5)
Provisions for liabilities and charges (2.7) (2.5)
Net assets 121.3 125.1
Capital and reserves
Called-up share capital 30.7 30.7
Share premium 3.5 3.5
Other reserves 17.7 17.7
Profit and loss account 69.4 73.2
Equity shareholders' funds 5 121.3 125.1
Group Statement of Total Recognised Gains and Losses
for the year ended 31 December 2002
2002 2001
£m £m
Profit for the financial period 3.9 4.4
Currency translation differences on overseas assets and goodwill (2.3) (1.3)
Tax benefits on foreign exchange losses 0.7 0.5
Total recognised gains and losses relating to the year 2.3 3.6
There is no material difference between the profits as reported and those
profits restated on an historical cost basis.
Senior plc
Group Cash Flow Statement
for the year ended 31 December 2002
Notes 2002 2002 2001 2001
£m £m £m £m
Net cash inflow from operating activities 4a) 43.9 46.9
Dividend income from associated undertaking - 0.2
Returns on investments and servicing of finance
Interest received 0.6 0.7
Interest paid (7.9) (10.4)
Net cash outflow from returns on investments and servicing
of finance (7.3) (9.7)
Taxation
UK corporation tax recovered/(paid) 0.1 (0.4)
Overseas tax recovered 0.2 7.4
0.3 7.0
Capital expenditure and financial investments
Purchase of tangible fixed assets (11.6) (16.5)
Sale of property, plant and equipment 1.4 0.9
Net cash outflow from capital expenditure and financial (10.2) (15.6)
investments
Acquisitions and disposals
Purchase of subsidiary undertakings - deferred
consideration (0.6) (0.6)
Sale of subsidiary undertakings 2.8 6.6
Sale of associated undertaking - 5.9
Net cash disposed on sale of subsidiary undertakings - (0.4)
Net cash inflow from acquisitions and disposals 2.2 11.5
Dividends paid on ordinary shares (2.5) (15.0)
Net cash inflow before financing 26.4 25.3
Financing
New loans initiated by Group 5.2 32.3
Repayments of existing loans (37.5) (57.6)
Cash inflow on forward exchange contracts 0.2 -
(32.1) (25.3)
Decrease in cash in the period 4b) (5.7) -
Senior plc
Notes:
1 Segment Information
Group turnover, operating profit and net assets are analysed below. The
reconciliation of operating profit to profit before taxation is shown in the
Group Profit and Loss Account. The reconciling items are considered to be of a
Group nature and not directly attributable to individual segments. 2002
discontinued operations reflect the turnover and operating results of Senior
Flexonics Bredan A/S, BHC a.s., Senior Flexonics Polska Spolka zo.o and the UK
Expansion Joints Division of Senior UK Limited, all of which were sold during
2002.
a) By class of business
Turnover Turnover Operating Operating Net Net
profit profit assets assets
2002 2001 2002 2001 2002 2001
£m £m £m £m £m £m
Aerospace 164.6 196.8 4.0 12.8 128.4 147.3
Automotive 148.4 160.0 11.4 6.6 43.6 53.3
Specialised Industrial 86.1 88.5 2.2 1.6 39.2 44.8
Total 399.1 445.3 17.6 21.0 211.2 245.4
Inter-segment sales (0.4) (1.0) - - - -
Total continuing
operations 398.7 444.3 17.6 21.0 211.2 245.4
Discontinued operations 5.7 19.4 - 0.3 (3.3) 3.6
404.4 463.7 17.6 21.3 207.9 249.0
Operating profits shown above are stated after charging £1.3 million (2001 -
£6.9 million) of exceptional items and £5.8 million (2001 - £6.2 million) of
goodwill amortisation. These are attributed to the segments as follows:
Exceptional items Goodwill amortisation
2002 2001 2002 2001
£m £m £m £m
Aerospace 0.8 1.6 3.6 3.6
Automotive 0.4 5.1 0.9 1.1
Specialised Industrial 0.1 0.2 1.3 1.4
Total continuing operations 1.3 6.9 5.8 6.1
Discontinued - - - 0.1
operations
1.3 6.9 5.8 6.2
b) By geographical market
Turnover Turnover Turnover Turnover Operating Operating Net Net
by by by by profit by profit by assets assets
destination destination origin origin origin origin
2002 2001 2002 2001 2002 2001 2002 2001
£m £m £m £m £m £m £m £m
North
America 237.2 278.7 252.5 295.0 15.8 19.9 119.7 143.0
United
Kingdom 54.2 54.3 68.0 75.0 1.7 5.4 61.7 64.7
Rest of
Europe 91.9 90.2 68.4 65.7 (1.7) (2.2) 24.6 30.1
Rest of
World 22.9 28.8 17.3 16.3 1.8 (2.1) 5.2 7.6
Total 406.2 452.0 406.2 452.0 17.6 21.0 211.2 245.4
Inter-segment
sales (7.5) (7.7) (7.5) (7.7) - - - -
Total
continuing
operations 398.7 444.3 398.7 444.3 17.6 21.0 211.2 245.4
Discontinued
operations 5.7 19.4 5.7 19.4 - 0.3 (3.3) 3.6
404.4 463.7 404.4 463.7 17.6 21.3 207.9 249.0
Operating profits shown above are stated after charging £1.3 million (2001 -
£6.9 million) of exceptional items and £5.8 million (2001 - £6.2 million) of
goodwill amortisation. These are attributed to the segments as follows:
Exceptional items Goodwill amortisation
2002 2001 2002 2001
£m £m £m £m
North America 0.5 2.4 2.9 3.2
United Kingdom 0.2 0.2 2.4 2.4
Rest of Europe 0.6 0.3 0.1 0.1
Rest of World - 4.0 0.4 0.4
Total continuing operations 1.3 6.9 5.8 6.1
Discontinued operations - - - 0.1
1.3 6.9 5.8 6.2
c) Net assets reconciliation 2002 2001
£m £m
Net assets, as above 207.9 249.0
Unallocated assets/(liabilities), net 0.8 (1.2)
Net borrowings (87.4) (122.7)
Net assets, per Balance Sheet 121.3 125.1
d) Total exceptional items 2002 2001
£m £m
Reorganisation and rationalisation charges - continuing operations 1.3 2.9
Impairment of goodwill, previously recognised on acquisition of Brazilian operations - 4.0
1.3 6.9
2 Dividends
The proposed final dividend is at the rate of 1.35p per share (2001 - 0.16p)
making 2.00p for the year (2001- 2.00p) and, if approved, will be payable on 29
May 2003 to shareholders on the register at the close of business on 2 May 2003.
3 Earnings per Share
The calculations of basic earnings per share and underlying earnings per share
are shown below and have been based on the weighted average number of ordinary
shares in issue and ranking for dividend during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of all
dilutive potential ordinary shares. The Group has only one category of dilutive
potential ordinary shares in the current year, being those share options granted
where the exercise price is less than the average price of the Company's
ordinary shares during the year.
The provision of an underlying earnings per share has been included to identify
the performance of operations before amortisation and impairment of goodwill,
profit or loss on sale of fixed assets and loss on disposal of discontinued
operations and associated undertakings.
Earnings Earnings Earnings Earnings
per share per share
2002 2001 2002 2001
pence pence £m £m
Basic profit on ordinary activities after 1.29 1.46 3.9 4.4
taxation
Adjust:
Amortisation of goodwill 1.88 2.01 5.8 6.2
Amortisation of goodwill on associated - 0.03 - 0.1
undertaking
Impairment of goodwill - 1.30 - 4.0
Loss/(profit) arising on sale of fixed 0.16 (0.03) 0.5 (0.1)
assets
Loss on disposal of discontinued 1.14 0.26 3.5 0.8
operations
Loss on disposal on associated undertaking - 0.48 - 1.5
Underlying earnings 4.47 5.51 13.7 16.9
Weighted average number of - basic 306.5m 306.5m
shares
- diluted 306.8m 307.1m
- underlying 306.5m 306.5m
Earnings per share - basic 1.29p 1.46p
- diluted 1.29p 1.45p
- underlying 4.47p 5.51p
4 Group Cash Flow Statement
a) Reconciliation of operating profit to net cash inflow from operating
activities 2002 2001
£m £m
Group operating profit 17.6 21.3
Depreciation of tangible fixed assets 17.8 18.4
Amortisation of goodwill 5.8 6.2
Impairment of goodwill - 4.0
Decrease in stocks 3.9 4.9
Decrease in debtors 3.2 12.2
Decrease in creditors (1.1) (20.4)
Working capital currency variations (3.3) 0.3
Net cash inflow from operating activities 43.9 46.9
The net cash inflow from operating activities includes an inflow of £0.1 million
(2001 - £1.0 million outflow) in respect of discontinued activities and an
outflow of £2.1 million (2001 - £2.1 million outflow) in respect of exceptional
items.
b) Reconciliation of net cash flow to movement in net debt 2002 2001
£m £m
Decrease in cash in the period (5.7) -
Decrease in loans 32.3 25.3
Net cash inflow on forward contracts (0.2) -
Change in net debt resulting from cash flows 26.4 25.3
Non cash items (1.5) -
Currency variations on net borrowings 10.4 (1.5)
Movement in net debt in the period 35.3 23.8
Net debt at 1 January (122.7) (146.5)
Net debt at 31 December (87.4) (122.7)
c) Analysis of net debt At Cashflow Non Exchange At
1 January cash movement 31 December
2002 items 2002
£m £m £m £m £m
Cash 14.9 (5.1) - (0.2) 9.6
Overdrafts (1.5) (0.6) - 0.1 (2.0)
Debt due within one year (9.8) 9.6 (2.3) 0.1 (2.4)
Debt due after one year (125.7) 22.6 2.3 6.2 (94.6)
Finance leases (0.6) 0.1 (1.5) (0.1) (2.1)
Forward exchange contract gains - (0.2) - 4.3 4.1
Total (122.7) 26.4 (1.5) 10.4 (87.4)
Debt due within one year shown above includes short-term bank borrowings of £nil
million (2001 - £0.1 million).
The forward exchange contract gains are included within prepayments and accrued
income falling due within one year.
Non cash items represent an additional finance lease liability entered into in
the year (2001 - nil).
5 Reconciliation of Movements in Shareholders' Funds
Group Share Share Other reserves Profit Total
capital premium Revaluation Special Total and loss
account account
£m £m £m £m £m £m £m
At 1 January 2002 30.7 3.5 0.7 17.0 17.7 73.2 125.1
Profit for the financial year - - - - - 3.9 3.9
Dividends - - - - - (6.1) (6.1)
Currency variations - - - - - (1.6) (1.6)
At 31 December 2002 30.7 3.5 0.7 17.0 17.7 69.4 121.3
6 Status of Financial Information
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2002 or 2001 but is derived
from those accounts. Statutory accounts for 2001 have been delivered to the
Registrar of Companies, and those for 2002 will be delivered following the
Company's Annual General Meeting. The Auditors have reported on those accounts;
their reports were unqualified and did not contain statements under Sections 237
(2) or (3) of the Companies Act 1985.
This information is provided by RNS
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