Half Yearly Report

RNS Number : 5058K

TT electronics PLC

22 August 2012

 



TTG.L

22 August 2012

TT ELECTRONICS PLC

A global provider of performance critical technology solutions to leading manufacturers

Half Year Report for the six months ended 30 June 2012

HIGHLIGHTS

£million		Six months ended 30 June 2012	Six months ended 30 June 2011
Continuing operations
Revenue		271.2	281.8
Operating profit1		15.1	15.2
Operating profit margin1		5.6%	5.4%
Profit before taxation and exceptional items		13.3	13.3
Profit before taxation		12.5	20.8
Headline earnings per share1		6.0p	5.7p
Dividend per share		1.5p	1.2p
Net debt		(7.3)	(24.2)

¹ Before exceptional items (£0.8 million charge in 2012, £7.5 million pensions credit in 2011)

·       A resilient performance in an uncertain macroeconomic environment

·       Continued progress towards margin targets, underpinned by improved product mix and self-help actions

·       Future growth supported by strong pipeline of new business opportunities

·       Further investment in products, people and emerging markets

·       Sale of Dale Power Solutions completed in July in line with our strategy to be a more focussed electronics company

·       Interim dividend of 1.5 pence per share, an increase of 25 per cent, reflecting financial strength, progressive policy and confidence in future performance.

Geraint Anderson, Group Chief Executive, said today:

"Overall we are pleased with the resilience of the business in the current economic conditions.  We have continued to make progress reducing our cost base with key projects delivered ahead of plan, and additional programmes now underway.  These activities, together with an improving product mix, will deliver further margin growth in a more challenging market environment in the second half.  Our global strength has positioned us well with both emerging key accounts and traditional customers, and we have won several major new contracts."

For further information please contact:

TT electronics plc                                       Tel:  [phone]

Geraint Anderson, Group Chief Executive

Shatish Dasani, Group Finance Director

Hudson Sandler                                          Tel:  [phone]

Andrew Hayes/Andrew Leach/Wendy Baker

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

Chairman's statement

I am pleased to report that TT electronics has delivered a resilient first half performance with continued progress towards its margin targets in a market that became more difficult towards the end of the half year. Revenue from continuing operations decreased to £271.2 million (2011: £281.8 million), a reduction of 2.9 per cent at constant exchange rates. Operating profit before exceptional items was £15.1 million (2011: £15.2 million), comparing favourably to the same period in 2011 where profitability benefited from a sharp increase in demand in certain markets following the Japanese earthquake and the strong automotive recovery. Despite the difficult markets, actions we have taken delivered margin progression, with the operating profit margin increasing from 5.4 per cent in the first half of 2011 to 5.6 per cent. Headline earnings per share was 6.0 pence (2011: 5.7 pence), an increase of 5.3 per cent compared to 2011.

We have made good progress delivering our strategy with continued investment in product development, people and emerging regions to support future growth. The expansion of our best cost manufacturing centres is on track with production commencing at our new site in Romania in the period.  The closure of the Boone, North Carolina facility and the associated significant expansion of the Mexicali, Mexico facility has progressed well and will be completed in the third quarter, ahead of schedule.

We are committed to focusing on our electronics businesses and are successfully continuing to build our position as a supplier of critical solutions to markets with strong underlying growth drivers where the use of complex electronics is increasing to meet demands for improvements in performance and reliability.

In July 2012 we successfully completed the sale of Dale Power Solutions Limited for £10.0 million, following the disposal of the businesses in the General Industrial division, in line with the Group's strategy of realising value from businesses that are non-core.

The Group is in a strong financial position with net debt of £7.3 million (2011: £24.2 million).  The debt facility has been refinanced at a level of £70 million for a term of five years, providing funding for the Group's organic and inorganic expansion plans.

The Board is pleased to declare an interim dividend of 1.5 pence per share (2011:1.2 pence). This represents an increase of 25 per cent over the prior year, reflecting the Board's confidence in the Group's financial position and future prospects.

Outlook

In an uncertain macroeconomic environment the Group delivered a resilient first half performance, although market confidence has deteriorated in the last few months.  We have therefore moderated our expectations for overall sales and profit for 2012.  However, we expect to make further progress on margins supported by new business wins, market share gains, improved productivity and a better product mix.  We continue to invest and to pursue opportunities to drive growth in our chosen markets and we remain confident of meeting our operating margin targets.

Sean M Watson

Chairman

21 August 2012

  

Business review

Against a tough market backdrop the business performed well and we made further progress towards our margin targets with profitability underpinned by the ongoing programme to improve product mix and optimise the cost base, offset by investments to deliver future growth.

We made good progress developing our position in markets with strong fundamental growth dynamics where the demand for improvements in the performance and reliability of complex electronics is increasing and which we believe present the greatest opportunities. The pipeline of qualified new business opportunities continues to increase, particularly in the Sensors and Components divisions. Although still relatively small in absolute terms, revenue from the renewable energy market increased by 38 per cent and sales to the medical market increased by 6 per cent, both at constant currency rates. The premium passenger car market remains the largest segment for the Group representing 38 per cent of revenue, due primarily to growth from the top three German automotive OEMs.

We are enhancing our operating footprint to reflect the global nature of our business and improve profitability through the development of regional best cost manufacturing centres of excellence enabling the transfer of business from higher cost regions, whilst providing local support to our customers.  Our facility in Mexicali, Mexico, offers an attractive better-cost centre for the Americas and activity has significantly increased following the successful transfer of manufacturing from our factory in Boone, North Carolina, and certain functions from other sites.  Significant investment has been made in our new facility in Romania with production commencing during the period.  A number of additional lines will be moved to Romania from our site in Austria during the third quarter.

In line with the Group's strategy to realise value from non-core businesses, on 31 July 2012, the Group completed the sale of Dale Power Solutions Limited ("Dale"), a UK based company, for £10.0 million in cash. The sale of Dale, which formed part of the Secure Power division, follows the successful conclusion of the disposal process for our General Industrial division last year, and increases the focus on our electronics divisions supplying leading manufacturers in the defence, aerospace, medical, transportation and industrial markets.

In August, the Group completed the re-financing of its existing facility (due to be repaid in May 2013) with a new five year committed revolving credit facility of £70 million and an incremental accordion facility of £42 million.  These new facilities secure the Group's financing until August 2017, thus facilitating the Group's organic and inorganic expansion plans.  Net debt at 30 June 2012 was £7.3 million compared to a net cash position of £15.2 million at 31 December 2011.  The movement is primarily due to seasonal working capital outflows and higher working capital levels associated with the ramp up of the Mexican and Romanian facilities.

Overview of Group performance

Continuing operations   £million	Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Revenue
Components	116.4	124.2	242.7
Sensors	79.6	85.6	166.9
Integrated Manufacturing Services	51.2	51.8	100.0
Secure Power	24.0	20.2	50.9
	271.2	281.8	560.5

Operating profit 1 Components	7.3	7.1	14.8
Sensors	4.1	4.5	8.8
Integrated Manufacturing Services	2.9	2.9	5.1
Secure Power	0.8	0.7	3.7
	15.1	15.2	32.4

    

¹ Throughout this review operating profit is stated before exceptional items

Revenue from continuing operations decreased by 3.8 per cent in the half year to £271.2 million, reflecting more difficult market conditions and the planned exit from certain lower margin projects.  The comparative period in 2011 was also affected favourably by a pull-forward of orders following the Japan earthquake. After adjusting for a foreign exchange loss of 0.9 per cent, the underlying decrease was 2.9 per cent.

The Components division performed relatively well in the period gaining market share in key segments, although sales at constant exchange rates were down by 6.1 per cent.

In the Sensors division, revenue from the major German OEMs grew by 4 per cent, in line with expectations.  Overall, underlying sales at constant exchange rates in the division were down by 2.5 per cent, primarily due to slowing demand from certain smaller European OEMs and European truck customers.

The IMS division performed well in a challenging market environment with continued progress being made with key global strategic customers.  Revenue in the Secure Power division, excluding Dale, increased by 17.0 per cent on an underlying basis with solid demand from key Latin American export markets.

The overall Group operating profit margin improved from 5.4 per cent in the first half of 2011 to 5.6 per cent despite the challenging market environment, and we remain confident of delivering further improvements. Ourfocus on product management, productivity improvements from our operational excellence programme and the actions taken to improve the underlying cost base resulted in an operating profit before exceptional items from continuing operations of £15.1 million, a slight decrease compared to the first half of 2011. The Components and IMS divisions both delivered higher margins, while the Sensors division's margin was impacted by investments made to develop its global capabilities in response to customer demand. The Secure Power division margin also decreased slightly compared to the prior year.

There was a small variation in average exchange rates in the first six months of 2012 compared with 2011, with the main changes being a strengthening of Sterling against the Euro by 5.7 per cent, and a weakening of Sterling against the US dollar by 1.9 per cent. This foreign exchange movement resulted in an adverse impact on operating profits of £0.4 million for Sensors and net £0.1 million for the Group overall.

Components

£million	Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Revenue	116.4	124.2	242.7
Operating profit	7.3	7.1	14.8
Operating profit margin	6.3%	5.7%	6.1%

The Components division is focused on creating value by delivering innovative electronic solutions with increased functionality, efficiency and control coupled with best in class service and support worldwide.

The division performed well in a difficult market environment which was characterised by lower levels of confidence with customers reducing inventory levels and lead times. Operating profits increased to £7.3 million, with the operating profit margin increasing to 6.3 per cent.  Underlying revenue decreased by 6.1 per cent, (after adjusting for a negative foreign exchange impact of 0.2 per cent) compared to a record first half of 2011 which benefited from an increase in activity following the Japanese earthquake.

In spite of market challenges, the division continued to focus on margin progression delivering an improvement in profitability.  We responded rapidly at an operational level to mitigate the impact in areas where we saw a reduction in demand and took actions to balance pressures on prices and raw material costs. Additionally we continue to focus on applications where we can create value, on productivity improvements and on initiatives to further improve the underlying cost base. 

The closure of the Boone, North Carolina facility and the associated significant expansion of the Mexicali, Mexico facility has progressed well and will be completed ahead of schedule, delivering the annualised benefits of £2.5 million per year several months earlier than planned. As mentioned above we commenced manufacturing in Romania during the period and further programmes are being evaluated to improve the division's competitive position. 

We have continued to drive new product introductions and the division won more new business than in the comparable period in 2011.  As a result of our focus on key accounts, product management and markets with strong underlying growth drivers, the division performed significantly better than a number of competitors gaining market share in key segments.

 
Sensors

£million	Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Revenue	79.6	85.6	166.9
Operating profit	4.1	4.5	8.8
Operating profit margin	5.2%	5.3%	5.3%

The Sensors division provides solutions for critical applications which require high levels of precision and reliability, often operating in extremely harsh environments. The division is focused primarily on the transportation and industrial markets globally.

The division performed broadly in line with expectations in the first half of 2012. Demand from our top three German automotive customers grew by 4 per cent, after allowing for committed price downs, primarily due to continuing strong demand for passenger cars in Russia, Asia and North America. We also saw growth from indigenous Chinese OEMs including JAC, Chery and BYD. Following a very strong recovery in the first half of 2011, overall underlying revenue for the period, excluding an adverse foreign exchange impact of 4.5 per cent, decreased by 2.5 per cent primarily as a result of slowing demand from certain smaller European OEMs and European truck customers.

Operating profits for the period decreased to £4.1 million, after a £0.4 million adverse exchange impact, with the operating profit margin reducing slightly to 5.2%, reflecting investments being made to further globalise the business and increase our capabilities, and product mix.  Margins are expected to improve in the second half due to mix, agreed price increases and productivity benefits.

The division is continuing to see operating efficiencies from the lean manufacturing programmes being put in place in all of our facilities, as well as increasing the skills of our workforce through training programmes.  We continue to move talented individuals from our European facilities to our emerging regions reflecting our growing manufacturing presence in and the importance of these locations. We are planning our first projects for Romania and anticipate commencing manufacturing there in early 2013.  We have strengthened our global management team with the appointment of a VP of Global Product Management, based in India.

The division's global footprint, reputation and strong customer contacts have resulted in significant new business won and identified.  We are investing in resources and capital to take advantage of these opportunities which will move into volume production in 2014.  Additionally we see good opportunities to supplement organic growth. 

Integrated Manufacturing Services

£million	Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Revenue	51.2	51.8	100.0
Operating profit	2.9	2.9	5.1
Operating profit margin	5.7%	5.6%	5.1%

With manufacturing facilities in the UK, USA, China and Malaysia, the division draws on its design engineering capabilities, flexibility and worldclass facilities to provide high quality electronic manufacturing support to customers in the defence and aerospace, medical and premium industrial sectors.

The division has performed well in a difficult market environment. Whilst the underlying base business has decreased, this has been offset by new business resulting from the investments made in 2011 to strengthen the sales team and our focus on winning key strategic customers.

Our customers are continuing to benefit from our global manufacturing footprint, including our low cost centres in China and Malaysia, and we are gaining market share in all of the key segments where we operate. We were particularly pleased to secure a significant new global aerospace and defence customer which will bring potential business for multiple locations.

Underlying revenue for the period, excluding a foreign exchange benefit of 2.6 per cent, decreased by 3.8 per cent compared to the first six months of 2011. The operating profit margin improved to 5.7 per cent, and further improvement is expected in the second half.

Secure Power

£million	Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Revenue	24.0	20.2	50.9
Operating profit	0.8	0.7	3.7
Operating profit margin	3.3%	3.5%	7.3%

The division provides secure power solutions including generating sets, uninterruptible power supplies, and service and support to a wide variety of global industries which require reliable consistent power.

The divisional results shown in the table above relate to the Secure Power businesses within Mexico and Brazil only.  The results for Dale, following its disposal in July, are included within discontinued operations. The Secure Power divisional structure has been unwound and the local management team in Mexico has been strengthened.

Investments made in the sales and distribution channels, combined with the extension of the product range resulted in an increase in underlying revenue for the division of 17.0 per cent to £24.0 million, compared to the prior year period when the business experienced lower levels of underlying demand (excluding a foreign exchange benefit of 1.6 per cent). Operating profit increased to £0.8 million giving an operating profit margin of 3.3 per cent.  The business normally experiences seasonality in demand with a stronger second half year and we expect this to continue to be the case in 2012.  The business entered the second half in an improved position with a stronger order book than at this time in 2011.

Measuring our performance

The Group has a clear strategy to improve performance and deliver shareholder value.  Progress against this strategy is monitored using the Key Financial Performance Indicators detailed in the 2011 Annual Report.  Underlying revenue growth for continuing operations decreased by 2.9 per cent compared to the first half of 2011, against the target of mid to high single digit growth, reflecting challenging market conditions.  The Group made further progress towards its operating profit margin target of 8 to 10 per cent in the medium term with the operating profit margin increasing to 5.6 per cent from 5.4 per cent compared to the same period in 2011.  Improvements in first half operating profit margins were made by both the Components and IMS divisions, while the Sensors division's margin reduced slightly reflecting ongoing investment and product mix. 

Operating cash conversion was below target due to seasonal working capital outflows detailed further below.

Exceptional items

An exceptional cost of £0.8 million has been recognised in the half year, compared to an exceptional credit of £7.5 million during the first half of 2011. 

£million	Six months ended 30 June 2012	Six months ended 30 June 2011
Continuing operations
Reduction in UK pension liabilities	-	7.5
Restructuring costs	(0.8)	-
Total	(0.8)	7.5

The exceptional costs in the first half relate to restructuring costs associated with the closure of the Components operation in Boone, North Carolina.  This facility will close ahead of schedule in the third quarter of 2012.

Taxation

The tax charge for the half year was £3.6 million (2011:  £4.4 million), representing an effective tax rate of 29.3 per cent on continuing operations excluding exceptional items (2011 published full year: 30.2 per cent).  The reduction in rate was due to further progress being made in optimising the Group's tax position.

Earnings per share and dividends

Headline earnings per share from continuing operations were 6.0 pence which represents an increase of 5.3 per cent over the 2011 figure.  Basic earnings per share from continuing operations were 5.7 pence, compared to 10.6 pence for the same period in 2011 (of which 4.8 pence per share was attributable to exceptional gains in that period).

The Directors have declared an interim dividend of 1.5 pence per share, an increase of 25.0 per cent over the interim dividend paid in 2011.  The Group's policy is to increase dividends progressively whilst maintaining cover of at least two times underlying earnings per share.  The interim dividend will be paid on 1 November 2012 to shareholders on the register on 19 October 2012.

Discontinued operations

On 31 July 2012 the Group disposed of Dale Power Solutions Limited, a business forming part of the Secure Power division, for consideration of £10.0 million in cash before costs.  This business has been classified as a discontinued operation in the Condensed consolidated income statement, with its assets and related liabilities classified as being held for sale as at 30 June 2012.  Discontinued operations shown for 2011 comprise Dale Power Solutions Limited and AEI Compounds Limited, which was disposed of in July 2011.

Pensions

The Group operates one significant defined benefit scheme in the UK and two overseas defined benefit schemes in the USA and Japan.  All of these schemes are closed to new members and the UK and USA schemes were closed to future accrual during 2010.

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

£million	At 30 June 2012	At 30 June 2011	At 31 December 2011
Fair value of assets	363.9	347.8	378.0
Present value of funded obligation	(401.8)	(377.8)	(413.5)
Net liability recognised in the balance sheet	(37.9)	(30.0)	(35.5)

The triennial valuation of the UK scheme as at April 2010 showed a deficit of £39.8 million.  A funding agreement is in place with the Trustee, fixing contributions at £3.7 million in 2012 and increasing by £0.2 million each year to £4.5 million in 2016.  In addition, the Company has agreed to set aside £1.0 million per year for the next three years to be utilised in agreement with the Trustee for reducing the long-term liabilities of the scheme.

Cash flow, borrowings and facilities

Operating cash flow before exceptional payments for the half year was £3.8 million, compared to £7.0 million in the same period during 2011.  Capital expenditure increased by £3.9 million to £11.9 million, exceeding depreciation of £8.5 million, primarily as a result of the investments being made as we scale the facilities in Mexico and Romania, and develop our Sensors business in China, India and Mexico.

Net debt at 30 June 2012 was £7.3 million, compared to £24.2 million at 30 June 2011.  At 31 December 2011 the Group had a net cash balance of £15.2 million, with the decrease in the half year relating to seasonal working capital outflows and higher working capital levels associated with the transition of manufacturing to the Mexican and Romanian facilities.  Trade working capital levels as a percentage of sales were 17 per cent at 30 June 2012, compared to 16 per cent at 31 December 2011 and 20 per cent at 30 June 2011.

The Group has recently completed the re-financing of its existing three year club facility which was due for repayment in May 2013.  The Group has agreed a five year committed revolving credit facility of £70 million and a further incremental accordion facility of £42 million with a club of four banks comprising HSBC, The Royal Bank of Scotland, Santander UK and Barclays Bank, as well as two separate bi-lateral agreements with Fifth Third Bank and Comerica Bank, both within the USA.  Following the re-financing, the Group has over £100 million of available borrowing facilities.

The main financial covenants in the new facility restrict net debt to below 2.75 times EBITDA before exceptional items.  In addition, EBITDA before exceptional items is required to cover net finance charges by 4.0 times.  The covenants are tested half yearly on a rolling 12 month basis.  The financial covenants at 30 June 2012 under the previous facility agreement were comfortably met.

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

Geraint Anderson                                                                           Shatish D Dasani

Group Chief Executive                                                                    Group Finance Director

21 August 2012                                                                                21 August 2012

 

Responsibility statement

 

We confirm that to the best of our knowledge

 

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

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

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

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

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

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

            (ii)      any changes in the related parties transactions described in the Annual Report 2011 that could have a material effect on the financial position or performance of the Group in the current period.

On behalf of the Board

Geraint Anderson                                                                           Shatish D Dasani

Group Chief Executive                                                                    Group Finance Director

21 August 2012                                                                                21 August 2012

Cautionary Statement

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

Independent review report

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-year report for the six months ended 30 June 2012 which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated statement of changes in equity, the Condensed consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

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

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

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-year report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of half year financial statements for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

A J Sykes

for and on behalf of KPMG Audit Plc, Statutory Auditor

Chartered Accountants

15 Canada Square

London E14 5GL

21 August 2012

 

Condensed consolidated income statement (unaudited)

for the six months ended 30 June 2012

£million (unless otherwise stated)	Note	Six months ended 30 June 2012	Six months ended 30 June 2011*	Year ended 31 December 2011*
Continuing operations
Revenue	3	271.2	281.8	560.5
Cost of sales		(218.9)	(224.2)	(447.3)
Gross profit		52.3	57.6	113.2
Distribution costs		(18.6)	(20.4)	(39.1)
Administrative expenses		(20.1)	(15.3)	(41.1)
Other operating income		0.7	0.8	1.7
Operating profit		14.3	22.7	34.7
Analysed as:
Operating profit before exceptional items	3a	15.1	15.2	32.4
Exceptional items	5	(0.8)	7.5	2.3
Finance income	6	9.8	10.2	21.1
Finance costs	6	(11.6)	(12.1)	(25.8)
Profit before taxation		12.5	20.8	30.0
Taxation	7	(3.6)	(4.4)	(7.3)
Profit from continuing operations		8.9	16.4	22.7
Discontinued operations
(Loss)/profit from discontinued operations	4	(0.4)	0.9	2.3
Profit for the period attributable to owners of the Company		8.5	17.3	25.0
EPS attributable to owners of the Company - basic
From continuing operations (p)	8	5.7	10.6	14.6
From discontinued operations (p)	8	(0.3)	0.6	1.5
		5.4	11.2	16.1
EPS attributable to owners of the Company - diluted
From continuing operations (p)	8	5.7	10.6	14.3
From discontinued operations (p)	8	(0.3)	0.6	1.5
		5.4	11.2	15.8

*Re-presented for discontinued operations in accordance with IFRS.

Condensed consolidated statement of comprehensive income (unaudited)

for the six months ended 30 June 2012

£million		Six months ended  30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Profit for the period		8.5	17.3	25.0
Other comprehensive income/(loss) for the period after tax
Exchange differences on retranslation of foreign operations		(2.3)	0.8	0.9
Tax on exchange differences		-	-	0.1
(Loss)/gain on hedge of net investment in foreign operations		(1.5)	0.8	(0.6)
Net gain/(loss) on cash flow hedges taken to equity less amounts taken to income statement		0.2	(0.5)	0.2
Actuarial (loss)/gain on defined benefit pension schemes		(4.4)	2.5	(6.2)
Tax on actuarial amounts in pension deficit movement		0.3	(3.3)	(2.3)
Total comprehensive income for the period		0.8	17.6	17.1

Total comprehensive income for the six months ended 30 June 2012 is entirely attributable to the owners of the Company.

Condensed consolidated balance sheet (unaudited)

at 30 June 2012

£million	Note	At 30 June 2012	At 30 June 2011	At 31 December 2011
ASSETS
Non-current assets
Property, plant and equipment		91.1	90.8	90.9
Goodwill		66.8	65.5	67.3
Other intangible assets		10.5	13.7	11.8
Deferred tax assets		20.9	17.4	21.0
Total non-current assets		189.3	187.4	191.0
Current assets
Inventories		80.9	91.0	83.4
Trade and other receivables		84.0	98.7	85.6
Derivative financial instruments		1.4	0.2	0.5
Cash and cash equivalents		47.7	28.3	69.5
Total current assets		214.0	218.2	239.0
Assets classified as held for sale	4	15.9	11.8	-
Total assets		419.2	417.4	430.0
LIABILITIES
Current liabilities
Borrowings		53.8	14.3	14.2
Derivative financial instruments		7.2	0.7	6.9
Trade and other payables		95.8	105.0	113.0
Income taxes payable		10.2	4.5	6.1
Provisions		6.3	5.7	6.4
Total current liabilities		173.3	130.2	146.6
Non-current liabilities
Borrowings		0.7	39.6	40.1
Derivative financial instruments		-	4.0	-
Deferred tax liability		8.8	8.9	9.3
Pensions and other post-employment benefits	10	37.9	30.0	35.5
Provisions		0.2	0.4	0.2
Other non-current liabilities		6.4	5.8	6.9
Total non-current liabilities		54.0	88.7	92.0
Liabilities directly associated with assets classified as held for sale	4	6.4	3.5	-
Total liabilities		233.7	222.4	238.6
Net assets		185.5	195.0	191.4
EQUITY
Share capital		39.2	38.8	38.8
Share premium		0.6	0.5	0.5
Share options reserve		1.8	2.4	3.6
Hedging and translation reserve		23.6	27.7	27.2
Retained earnings		118.3	123.6	119.3
Equity attributable to owners of the Company		183.5	193.0	189.4
Non-controlling interests		2.0	2.0	2.0
Total equity		185.5	195.0	191.4

Condensed consolidated statement of changes in equity (unaudited)

for the six months ended 30 June 2012

£million	Share capital	Share premium	Share options reserve	Hedging reserve	Translation reserve	Retained earnings	Sub- total	Non- controlling interest	Total
At 1 January 2012	38.8	0.5	3.6	(11.5)	38.7	119.3	189.4	2.0	191.4
Profit for the period	-	-	-	-	-	8.5	8.5	-	8.5
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations	-	-	-	-	(2.3)	-	(2.3)	-	(2.3)
Net loss on hedge of net investment in foreign operations	-	-	-	-	(1.5)	-	(1.5)	-	(1.5)
Net gain on cash flow hedges taken to equity less amounts taken to income statement	-	-	-	0.2	-	-	0.2	-	0.2
Actuarial loss on defined benefit pension scheme	-	-	-	-	-	(4.4)	(4.4)	-	(4.4)
Tax on actuarial amounts in pension deficit movement	-	-	-	-	-	0.3	0.3	-	0.3
Total other comprehensive income	-	-	-	0.2	(3.8)	(4.1)	(7.7)	-	(7.7)
Transactions with owners recorded directly in equity
Equity dividends paid by the Company	-	-	-	-	-	(5.0)	(5.0)	-	(5.0)
Share-based payments	-	-	(1.5)	-	-	-	(1.5)	-	(1.5)
Deferred tax on share-based payments	-	-	(0.3)	-	-	-	(0.3)	-	(0.3)
New shares issued	0.4	0.1	-	-	-	(0.4)	0.1	-	0.1
At 30 June 2012	39.2	0.6	1.8	(11.3)	34.9	118.3	183.5	2.0	185.5
At 1 January 2011	38.8	0.4	1.6	(11.7)	38.3	109.7	177.1	2.0	179.1
Profit for the period	-	-	-	-	-	17.3	17.3	-	17.3
Other comprehensive income
Exchange differences on translation of foreign operations	-	-	-	-	0.8	-	0.8	-	0.8
Net gain on hedge of net investment in foreign operations	-	-	-	-	0.8	-	0.8	-	0.8
Net loss on cash flow hedges taken to equity less amounts taken to income statement	-	-	-	(0.5)	-	-	(0.5)	-	(0.5)
Actuarial gain on defined benefit pension scheme	-	-	-	-	-	2.5	2.5	-	2.5
Tax on actuarial amounts in pension deficit movement	-	-	-	-	-	(3.3)	(3.3)	-	(3.3)
Total other comprehensive income	-	-	-	(0.5)	1.6	(0.8)	0.3	-	0.3
Transactions with owners recorded directly in equity
Equity dividends paid by the Company	-	-	-	-	-	(3.1)	(3.1)	-	(3.1)
Share-based payments	-	-	0.7	-	-	-	0.7	-	0.7
Deferred tax on share-based payments	-	-	0.1	-	-	-	0.1	-	0.1
Change in fair value of minority put option	-	-	-	-	-	0.5	0.5	-	0.5
New shares issued	-	0.1	-	-	-	-	0.1	-	0.1
At 30 June 2011	38.8	0.5	2.4	(12.2)	39.9	123.6	193.0	2.0	195.0

Condensed consolidated cash flow statement (unaudited)

for the six months ended 30 June 2012 

£million	Note	Six months ended 30 June 2012	Six months ended 30 June 2011*	Year ended 31 December 2011*
Cash flows from operating activities
Profit for the period		8.5	17.3	25.0
Taxation		3.6	4.4	7.3
Net finance costs		1.8	1.9	4.7
Exceptional items		0.8	(7.5)	(2.3)
Loss/(profit) from discontinued operations		0.4	(0.9)	(2.3)
Operating profit from continuing operations before exceptional items		15.1	15.2	32.4
Adjustments for:
Depreciation of property, plant and equipment		8.5	9.6	16.9
Amortisation of intangible assets		3.0	4.1	7.6
Impairment of intangible assets		0.1	-	0.6
Other items		0.2	1.4	0.1
Increase in inventories		(6.5)	(11.5)	(5.3)
(Increase)/decrease in receivables		(6.6)	(10.3)	0.8
(Decrease)/increase in payables		(10.0)	(1.5)	9.9
Operating cash flow before exceptional payments		3.8	7.0	63.0
Special payments to pension funds		(1.9)	(1.8)	(3.5)
Exceptional restructuring costs		(2.2)	(0.4)	(2.2)
Net cash (used in)/generated from operations		(0.3)	4.8	57.3
Income taxes paid		(0.2)	(4.8)	(7.9)
Net cash flow from operating activities		(0.5)	-	49.4
Cash flows from investing activities
Interest received		0.3	0.1	0.3
Purchase of property, plant and equipment		(11.9)	(8.0)	(21.3)
Proceeds from sale of property, plant and equipment and grants received		0.2	0.4	2.0
Development expenditure		(2.1)	(3.0)	(5.3)
Purchase of other intangibles		-	-	(0.3)
Disposal of subsidiaries (net of cash in subsidiaries at date of disposal)		-	-	7.6
Deferred consideration received from disposal of subsidiaries in 2010		-	0.8	0.7
Net cash flow used in investing activities		(13.5)	(9.7)	(16.3)
Cash flows from financing activities
Issue of share capital		0.1	0.1	0.1
Interest paid		(1.0)	(1.4)	(2.4)
Repayment of borrowings		-	(10.8)	(11.1)
Proceeds from borrowings		0.2	0.2	0.2
Finance leases		-	-	(0.1)
Other items		(2.3)	-	-
Dividends paid by the Company		(5.0)	(3.1)	(5.0)
Net cash flow used in financing activities		(8.0)	(15.0)	(18.3)
Net (decrease)/increase in cash and cash equivalents		(22.0)	(24.7)	14.8
Cash and cash equivalents at beginning of period	11	58.8	44.2	44.2
Overdraft/(cash) transferred to liabilities held for sale	11	0.5	(1.4)	-
Exchange differences	11	(0.2)	0.1	(0.2)
Cash and cash equivalents at end of period	11	37.1	18.2	58.8
Cash and cash equivalents comprise
Cash at bank and in hand		47.7	28.3	69.5
Bank overdrafts		(10.6)	(10.1)	(10.7)
	11	37.1	18.2	58.8

*Re-presented for discontinued operations in accordance with IFRS.

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

Notes to the Condensed consolidated financial statements (unaudited)

1.   General information

      The Condensed consolidated financial statements for the six months ended 30 June 2012 are unaudited and were authorised for issue in accordance with a resolution of the Board of Directors.  They do not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The comparative figures for the year ended 31 December 2011 are based on the Company's statutory accounts for that financial year re-presented for discontinued operations in accordance with IFRS.  Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies.  The report of the auditors was unqualified, did not include a reference to any matter to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 of the Companies Act 2006.

2.    Basis of preparation

a)    Condensed consolidated half-yearly financial statements

       These condensed consolidated half year financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.  These condensed consolidated half year financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the 2011 Annual Report and Accounts.

b)   Basis of accounting

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2011. Adoption of amendments to published standards and interpretations effective for the Group for the half year ended 30 June 2012 did not have any impact on the financial position and performance of the Group.

c)   Estimates

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

In preparing the condensed consolidated half-year financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those applied to the consolidated financial statements as at and for the year ended 31 December 2011.

d)   Going concern

After making appropriate enquiry, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the condensed consolidated half-year financial statements. The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business review on pages 3 to 8.

In August 2012 the Group completed the re-financing of its existing three year club facility which was due for repayment in May 2013.  The Group has agreed a five year committed revolving credit facility of £70 million and a further incremental accordion facility of £42 million with a club of four banks comprising HSBC, The Royal Bank of Scotland, Santander UK and Barclays Bank, as well as two separate bi-lateral agreements with Fifth Third Bank and Comerica Bank, both within the USA.  Following the re-financing the Group has over £100 million of available borrowing facilities.

The continuing volatility in the Eurozone economic environment has resulted in greater financial and operational uncertainty.  The Group continues to manage risk at a transactional level through the use of hedges which are monitored by the Group Treasury Committee.

The Treasury Committee regularly reviews counterparty credit risk, and ensures cash balances are held with carefully assessed counterparties with strong credit ratings.

Notes to the Condensed consolidated financial statements continued

d)   Going concern (continued)

The Treasury Committee has also performed an assessment of the sensitivity of the Group's Euro-denominated assets, liabilities and transactional activity to a variety of potential changes to the Eurozone economy and consequential impact on the Euro and has implemented various actions to mitigate the risk.

Pages 41 to 43 of the 2011 Annual Report provide details of the Group's policy on managing its operational and financial risks.

3.   Segmental reporting

       For management purposes, the Group is organised into four divisions, as shown below, according to the nature of the products and services provided. Each of these divisions represents an operating segment in accordance with IFRS 8 'Operating segments' and there is no aggregation of segments.  The chief operating decision maker is the Board of Directors. The operating segments are:

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

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

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

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

The accounting policies of the reportable segments are the same as the Group's accounting policies and are as published in the 2011 Annual Report and Accounts.

The key performance measure of the operating segments is operating profit before exceptional items. The Group reports non-trading income or expenditure as exceptional when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of its financial position.  Segment operating profit represents the profit earned by each segment after the allocation of central head office administration costs and is reviewed by the chief operating decision maker.

Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments.

Goodwill is allocated to the individual cash generating units within the segment of which they are a part.

a)    Income statement information - continuing operations

Six months ended 30 June 2012
£million	Components	Sensors	Integrated Manufacturing Services	Secure Power	Total
Sales to external customers	116.4	79.6	51.2	24.0	271.2
Segment operating profit before exceptional items	7.3	4.1	2.9	0.8	15.1
Exceptional items					(0.8)
Operating profit					14.3
Net finance costs					(1.8)
Profit before taxation					12.5

Notes to the Condensed consolidated financial statements continued

a)    Income statement information - continuing operations (continued)

Six months ended 30 June 2011 (re-presented)
£million	Components	Sensors	Integrated Manufacturing Services	Secure Power	Total
Sales to external customers	124.2	85.6	51.8	20.2	281.8
Segment operating profit before exceptional items	7.1	4.5	2.9	0.7	15.2
Exceptional items					7.5
Operating profit					22.7
Net finance costs					(1.9)
Profit before taxation					20.8

Year ended 31 December 2011 (re-presented)
£million	Components	Sensors	Integrated Manufacturing Services	Secure Power	Total
Sales to external customers	242.7	166.9	100.0	50.9	560.5
Segment operating profit before exceptional items	14.8	8.8	5.1	3.7	32.4
Exceptional items					2.3
Operating profit					34.7
Net finance costs					(4.7)
Profit before taxation					30.0

There are no significant sales between segments.

b)    Analysis of revenue by destination - continuing operations

£million	Six months ended 30 June 2012	Six months ended 30 June 2011 (re-presented)	Year ended 31 December 2011 (re-presented)
United Kingdom	39.8	39.6	79.4
Rest of Europe	121.0	127.1	250.1
North America	55.4	55.6	110.1
Central and South America	21.7	21.2	48.7
Asia	31.9	36.5	70.5
Rest of the World	1.4	1.8	1.7
Total continuing operations	271.2	281.8	560.5
Discontinued operations	14.4	24.7	43.2
Total revenue	285.6	306.5	603.7

Notes to the Condensed consolidated financial statements continued

4.    Discontinued operations and assets held for sale continued

On 31 July 2012 the Group disposed of Dale Power Solutions Limited, a business forming part of the Secure Power division.  The total consideration received from the sale was £10.0 million in cash before costs.  As the Directors were committed to making the disposal prior to 30 June 2012 the business has been classified as a discontinued operation, with the assets and related liabilities shown as being held for sale at the balance sheet date. 

During the year ended 31 December 2011 the Group disposed of AEI Compounds Limited, the last remaining business within the former General Industrial division.  The assets and related liabilities of this business were shown as being held for sale at 30 June 2011.

In accordance with IFRS 5 'Non-current assets held for sale and discontinued operations', comparatives for prior periods have been re-presented for business treated as discontinued.

a)   Income statement

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

£million	Six months ended 30 June 2012	Six months ended 30 June 2011 (re-presented)	Year ended 31 December 2011 (re-presented)
Revenue	14.4	24.7	43.2
Cost of sales	(11.9)	(21.3)	(37.1)
Gross profit	2.5	3.4	6.1
Distribution costs	(0.9)	(0.9)	(1.8)
Administrative expenses	(1.1)	(1.6)	(2.5)
Operating profit	0.5	0.9	1.8
Exceptional items	(0.9)	-	-
Net finance costs	-	-	-
(Loss)/profit before taxation	(0.4)	0.9	1.8
Taxation	-	-	-
(Loss)/profit after taxation	(0.4)	0.9	1.8
Profit on disposal of discontinued operations	-	-	0.5
(Loss)/profit from discontinued operations	(0.4)	0.9	2.3

The exceptional items relate to costs associated with the disposal of Dale Power Solutions Limited.

b)   Balance sheet

The major classes of assets and liabilities of Dale Power Solutions Limited classified as held for sale at 30 June 2012 were as follows:

	£million
Assets
Property, plant and equipment	1.3
Inventories	7.8
Trade and other receivables	6.8
Assets classified as held for sale	15.9
Liabilities
Overdrafts	(0.5)
Trade and other payables	(5.9)
Liabilities directly associated with assets classified as held for sale	(6.4)
Net assets classified as held for sale	9.5

Notes to the Condensed consolidated financial statements continued

c)   Cash flows

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

£million	Six months ended 30 June 2012	Six months ended 30 June 2011 (re-presented)	Year ended 31 December 2011 (re-presented)
Operating activities	(4.2)	(0.8)	2.8
Investing activities	(0.2)	(0.4)	(0.2)
Financing activities	-	-	2.8
Net cash flow	(4.4)	(1.2)	5.4

5.    Exceptional items

£million	Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Continuing operations
Reduction in UK pension liabilities	-	7.5	7.5
Restructuring costs	(0.8)	-	(5.2)
Total	(0.8)	7.5	2.3

a)   Six months ended 30 June 2012

For the six months ended 30 June 2012, the exceptional item relates to restructuring costs primarily associated with the closure of the Components operation in Boone, North Carolina.

b)   Six months ended 30 June 2011 and year ended 31 December 2011

       For the six months ended 30 June 2011 and year ended 31 December 2011, the exceptional items relate to:

·       a one-off reduction of £7.5 million in the future liabilities of the UK pension scheme following the UK Government's announcement to change the basis of indexation of occupational pension schemes from RPI to CPI; and

·       restructuring costs of £5.2 million primarily associated with the closure of the Components operation in Boone, North Carolina. This amount includes impairments of fixed assets of £1.8 million, provisions against inventory of £0.6 million and reorganisation provisions of £2.8 million.

Notes to the Condensed consolidated financial statements continued

6.    Finance income and costs

£million	Six months ended 30 June 2012	Six months ended 30 June 2011 (re-presented)	Year ended 31 December 2011 (re-presented)
Interest expense	1.0	1.0	2.2
Foreign exchange losses	0.4	0.6	2.3
Interest on employee obligations	9.4	9.9	20.0
Amortisation of arrangement fees	0.3	0.3	0.6
Unwinding of discount factor on minority put option	0.5	0.3	0.7
Finance costs	11.6	12.1	25.8
Interest income	0.3	0.1	0.5
Foreign exchange gains	0.4	0.6	1.6
Expected return on pension scheme assets	9.1	9.5	19.0
Finance income	9.8	10.2	21.1
Net finance costs	1.8	1.9	4.7

7.    Taxation

Taxation on the profit from continuing operations before exceptional items for the six months ended 30 June 2012 is based on the estimated full year rate of 29.1 per cent for the year ending 31 December 2012 (2011 effective tax rate of 30.2 per cent as published in the 2011 Annual Report).

8.    Earnings per share

       Basic earnings per share is calculated by dividing the profit attributable to the owners of the Company by the weighted average number of shares in issue during the period.  The weighted average number of shares in issue is 155.5 million (30 June 2011:  154.9 million, 31 December 2011: 154.9 million). 

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

Pence	Six months ended 30 June 2012	Six months ended 30 June 2011 (re-presented)	Year ended 31 December 2011 (re-presented)
Basic earnings per share
Continuing operations	5.7	10.6	14.6
Discontinued operations	(0.3)	0.6	1.5
Total	5.4	11.2	16.1

Pence	Six months ended 30 June 2012	Six months ended 30 June 2011 (re-presented)	Year ended 31 December 2011 (re-presented)
Diluted earnings per share
Continuing operations	5.7	10.6	14.3
Discontinued operations	(0.3)	0.6	1.5
Total	5.4	11.2	15.8

Notes to the Condensed consolidated financial statements continued

8.    Earnings per share (continued)

       The numbers used in calculating headline earnings per share are shown below:

£million	Six months ended 30 June 2012	Six months ended 30 June 2011 (re-presented)	Year ended 31 December 2011 (re-presented)
Continuing operations
Profit for the period attributable to owners of the Company	8.9	16.4	22.7
Exceptional items	0.8	(7.5)	(2.3)
Tax effect of exceptional items	(0.3)	-	(1.6)
Headline earnings	9.4	8.9	18.8
Headline earnings per share (pence)	6.0	5.7	12.1

9.    Dividends

	Pence per share	Six months ended 30 June 2012 £million	Pence per share	Six months ended 31 December 2011 £million
Final dividend for prior year	3.2	5.0	2.0	3.1
Interim dividend for current year	-	-	1.2	1.9
	3.2	5.0	3.2	5.0

The Directors have declared an interim dividend of 1.5 pence per share which will be paid on 1 November 2012 to shareholders on the register on 19 October 2012.  Shares will become ex-dividend on 17 October 2012.  The Group's dividend policy is to increase dividends progressively whilst maintaining cover of at least two times underlying earnings per share.

10.   Retirement benefit schemes

       The Group operates one significant defined benefit scheme in the UK and two overseas defined benefit schemes in the USA and Japan.  All of these schemes are closed to new members and the UK scheme is closed to future accrual. 

       The Company had reached agreement with the Trustee of the UK scheme for additional fixed contributions extending to 2016 based on the actuarial deficit at April 2007, which were confirmed under the actuarial valuation at April 2010.  £3.2 million was paid in 2010, £3.5 million was paid in 2011, £3.7 million will be paid in 2012 (of which £1.9 million was paid in the period) and further planned contributions amount to: 2013: £3.9 million; then increasing by £0.2 million each year to £4.5 million in 2016.

       Actuarial valuations of the schemes were carried out by independent qualified actuaries in 2007 and 2010 using the projected unit credit method. These actuarial valuations have been updated by the actuaries to assess the assets and liabilities of the schemes at 30 June 2012. Pension scheme assets are stated at market value at 30 June 2012.

Notes to the Condensed consolidated financial statements continued

10.   Retirement benefit schemes (continued)

The amounts recognised in the consolidated balance sheet are:

£million	At 30 June 2012	At 30 June 2011	At 31 December 2011
Fair value of assets	363.9	347.8	378.0
Present value of funded obligation	(401.8)	(377.8)	(413.5)
Net liability recognised in the balance sheet	(37.9)	(30.0)	(35.5)

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

£million		Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 December 2011
Current service cost		-	-	0.1
RPI/CPI change to indexation		-	(7.5)	(7.5)
Interest on employee obligations		9.4	9.9	20.0
Expected return on pension scheme assets		(9.1)	(9.5)	(19.0)

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

£million	Net cash	Borrowings and finance leases	Net (debt)/funds
At 1 January 2011	44.2	(54.1)	(9.9)
Cash flow	(24.7)	10.6	(14.1)
Transferred to assets held for sale	(1.4)	-	(1.4)
Non-cash items	-	(0.3)	(0.3)
Exchange differences	0.1	-	0.1
At 30 June 2011	18.2	(43.8)	(25.6)
Cash flow	39.5	0.4	39.9
Disposed of with assets held for sale	1.4	-	1.4
Non-cash items	-	(0.2)	(0.2)
Exchange differences	(0.3)	-	(0.3)
At 31 December 2011	58.8	(43.6)	15.2
Cash flow	(22.0)	(0.2)	(22.2)
Transferred to liabilities held for sale	0.5	-	0.5
Non-cash items	-	(0.3)	(0.3)
Exchange differences	(0.2)	0.2	-
	37.1	(43.9)	(6.8)
Net overdraft within liabilities classified as held for sale	(0.5)	-	(0.5)
Balance at 30 June 2012	36.6	(43.9)	(7.3)

Net cash represents cash and cash equivalents less bank overdrafts.  Net cash includes overdraft balances of £10.6 million (30 June 2011: £10.1 million, 31 December 2012: £10.7 million).  Net debt at 30 June 2011 after adjusting for cash balances within assets held for sale was £24.2 million.

Notes to the Condensed consolidated financial statements continued

12.   Share capital

During the period the Company issued 1,452,881 ordinary shares on the vesting of the Long Term Incentive Plan awards issued in May 2009.  The shares were then allocated to award holders via an Employee Benefit Trust for nil consideration.  A charge of £0.4 million has been recognised in retained earnings accordingly.  

The Company also issued 103,840 ordinary shares as a result of share options being exercised under the 2004 Approved Plan and Unapproved Plan and the Sharesave scheme.  The aggregate consideration received was £0.1 million, which resulted in an increase in share premium of £0.1 million.

13.   Related party transactions

      Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

       No related party transactions have taken place during the six months ended 30 June 2012 that have affected the financial position or performance of the Group.

14.  Post balance sheet events

On 31 July 2012 the Group disposed of Dale Power Solutions Limited, a business forming part of the Secure Power division.  The total consideration received from the sale was £10.0 million in cash before costs.

In August 2012 the Group completed the re-financing of its existing three year club facility which was due for repayment in May 2013.  The Group has agreed a five year committed revolving credit facility of £70 million and a further incremental accordion facility of £42 million with a club of four banks comprising HSBC, The Royal Bank of Scotland, Santander UK and Barclays Bank, as well as two separate bi-lateral agreements with Fifth Third Bank and Comerica Bank, both within the USA.

15.   Principal risks and uncertainties

As described on pages 41 to 43 of the 2011 Annual Report, the Group continues to be exposed to a number of operational and financial risks and has an established, structured approach to identifying, assessing and managing those risks. The Directors do not believe that the risks faced by the Group have changed significantly during the first six months of 2012.

 

END

 

 

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