Interim Results

RNS Number : 0677C

TT electronics PLC

27 August 2008

 



TTG.L

27 August 2008

TT ELECTRONICS PLC

TT electronics is a world leader in sensor and electronic component technology and announces its results for the six months to 30 June 2008.

Robust performance in difficult trading conditions

KEY POINTS

• Group revenue increased by 7.9% to £292.0 million (2007: £270.5 million)

• Profit before tax from continuing operations of £15.0 million (2007: £16.0 million)

• Earnings per share from continuing operations were 7.2 pence (2007: 7.4 pence)

• Continuing good cash generation from operations and a robust balance sheet provide a sound platform for the future

• Interim dividend of 3.69 pence per share (2007: 3.69 pence)

John Newman, Executive Chairman, said today:

'I am pleased to report that TT electronics has achieved a robust performance, increasing revenue despite the weakening economic climate.  This demonstrates the core strengths of the group: the breadth and depth of our businesses and our well established market positions in a number of sectors.  Our electronic manufacturing services businesses and secure power operations performed particularly well in the first half.'

Enquiries:

TT electronics plc	Tel: [phone]
Geraint Anderson, Group Chief Executive Shatish Dasani, Group Finance Director
Biddicks                     Zoë Biddick	Tel: [phone]

Highlights

		2008 First Half £million	2007 First Half £million	2007 Full Year £million
Continuing operations
Revenue		292.0	270.5	544.9
Operating profit		17.2	18.9	37.7
Profit before taxation		15.0	16.0	33.3
Earnings per share - basic		7.2p	7.4p	15.5p
Dividend per share		3.69p	3.69p	10.05p
Cash generated from operations		23.9	17.4	42.9

Chairman's statement

In the first half of 2008 revenue from continuing operations was £292.0 million compared to £270.5 million for the same period in 2007 and operating profit was £17.2 million compared to £18.9 million in 2007. Basic earnings per share were 7.2p compared to 7.4p from continuing operations in 2007.  

This half year's results are a good performance given the generally weaker economic climate. This has been particularly severe in the North American automotive market exacerbated by industrial action at a parts supplier which reduced vehicle production. In line with our stated plans we have further rationalised the manufacture of electronic systems for climate control products. The group is continuing to transfer manufacturing from high cost economies to our factories in China, Malaysia and India.

At the half year, after the payment of the final dividend of £9.9 million and the purchase of New Chapel Electronics Limited, the group net borrowings were £84.3 million compared to £83.5 million at 30 June 2007 and £75.0 million at 31 December 2007. The pension scheme deficit was £20.7 million at 30 June 2008, compared with £33.0 million at 30 June 2007 and £17.4 million at 31 December 2007.

On 2 April 2008, we announced the acquisition of New Chapel Electronics Limited for an initial cash consideration of £4.2 million. New Chapel Electronics is a manufacturer of wiring harnesses and connectors for the aerospace and military industries and will complement our international connection systems activities.

On 21 August 2008, the group announced that it had acquired assets comprising the majority of the business of Semelab Limited. The acquired business designs and produces specialised radio frequency and power semiconductors, optoelectronic components and power microcircuits and modules, primarily for the UK and European markets.

At the beginning of this month, a new management team joined the Board of TT electronics which I expect will bring a fresh approach and new ideas to the strategy of the group. Geraint Anderson is our new Group Chief Executive; he has spent the last nine years with Cisco Systems Inc and before then was Managing Director of the Communications Division of Prysmian (formerly Pirelli) SpA. Shatish Dasani has joined as our new Group Finance Director from De La Rue plc. This follows the retirement of Roderick Weaver who had held the position for 12 years. TT electronics will maintain its policy of tight financial control and build on the strength of its global companies, with renewed anticipation of success. 

The interim dividend is unchanged at 3.69p per share and will be paid on 23 October 2008 to shareholders on the register on 17 October 2008.  

In September, David Crowe will retire as a Director of TT electronics. David has been involved in the business for 20 years, initially as the group's Legal Counsel. He joined the Board as an executive Director in 1992 and since 2000 he has continued as a non-executive Director. His sound advice around the board room table has been well received and very much appreciated. We are sorry to lose him and wish him well in his retirement.  

Against a global economic downturn the group has performed well in the first half of the year. The acquisition of Semelab represents an excellent addition to the group's electronic component activities.

John W Newman

Executive Chairman

27 August 2008

Business review

TT electronics is a technology based group with a leading position in sensors and electronic components and a significant presence in electronic manufacturing services and secure power systems in global markets.

We joined the business as the newly appointed Group Chief Executive and Group Finance Director at the beginning of August 2008. With our backgrounds in customer focus, operational execution and passionate leadership, and with strong financial and performance improvement skills respectively, we are excited about the opportunities at TT electronics. In our first few weeks we have found a business with great management talent, some exciting products and a global footprint, all supported by a sound financial base and good business controls.

We have commenced a comprehensive business review and we anticipate setting out the future vision and strategy on or before the announcement of the results for the year ended 31 December 2008.

The summary of key financial performance indicators and a review of the group's overall performance for the first half are detailed as follows:

Overview of group performance

Continuing operations

		2008 First Half £million		2007 First Half £million		2007 Full Year £million
Revenue Sensors and electronic systems		101.4		90.7		182.3
Electronic components		70.5		67.5		131.2
Electronic manufacturing services		52.0		44.5		92.2
Secure power and industrial		68.1		67.8		139.2
		292.0		270.5		544.9

Operating profit Sensors and electronic systems		3.4		5.5		10.0
Electronic components		3.9		4.6		10.0
Electronic manufacturing services		3.7		1.9		4.1
Secure power and industrial		6.2		6.9		13.6
		17.2		18.9		37.7

Revenue increased by 7.9% in the half year to £292.0 million (2007: £270.5 million) due to continued growth of the electronic manufacturing services business, especially in China, and the secure power business in Mexico and the UK. There was also a favourable benefit from the translation of Euro-denominated sales, particularly in the sensors and electronic systems division.

Operating profit reduced in the period but was resilient given the generally deteriorating trading conditions in the USA and European markets, higher energy and commodity material costs and the effects of the industrial action at a parts supplier in the USA which reduced car production. Ongoing redundancy costs were also charged in the first half at a number of businesses and we will continue to move production to lower cost countries and manage our labour cost as tightly as possible.

The favourable effect of translation of revenue and operating profit was £11.9 million and £0.5 million respectively, mainly due to the strength of the Euro against sterling.

Throughout this review, the comparatives for revenue and operating profits are shown for continuing operations. There are no discontinued operations in 2008. In 2007 the group disposed of the AEI Cables business which is shown as a discontinued operation.

Sensors and electronic systems

		2008 First Half £million		2007 First Half £million		2007 Full Year £million
Revenue		101.4		90.7		182.3
Operating profit		3.4		5.5		10.0

Automotive sensors revenue, which is mainly sales to the German Original Equipment Manufacturers (OEMs) market, has been in line with expectations but the performance in the USA for both sensors and electronic systems has suffered due to both poor underlying demand from US automotive manufacturers and industrial action at a parts supplier. This strike halted production at some plants for much of March, April and May and reduced production by over 300,000 vehicles.  

Onerous price pressure and the large investment and the overhead necessary to develop a new range of electronic systems used in climate control products in the UK and USA have resulted in the decision to concentrate future manufacture in China. Accordingly, on 4 July 2008 the group announced that it is planning to transfer production from its factory in South Wales to an electronic manufacturing services factory nearby and to China. The North American factory will be used for the sales and service of climate control systems and is migrating its manufacturing capabilities to the production of interconnection systems. Autopad entered production during the first half and the order book continues to build. 

Electronic components

		2008 First Half £million		2007 First Half £million		2007 Full Year £million
Revenue		70.5		67.5		131.2
Operating profit		3.9		4.6		10.0

The overall market for components has stabilised since the softening of demand in the latter months of 2007. Operating profit in the period was affected by significant redundancy costs and the effects of industrial action at a parts supplier to the US automotive manufacturers. Our optoelectronic business continues to perform well with a number of significant design wins in the first half of the year.

The group announced the acquisition of the Semelab business on 21 August 2008 for a consideration of £9.8 million. This represents an excellent addition to the electronic component activities, supporting our strategy to focus on selling niche electronic components to higher margin end markets, including the military, aerospace and medical sectors. For the year to 31 October 2008, the business is expected to record an operating profit of approximately £1.0 million.

Electronic manufacturing services

		2008 First Half £million		2007 First Half £million		2007 Full Year £million
Revenue		52.0		44.5		92.2
Operating profit		3.7		1.9		4.1

The businesses in the UK and China have had a very successful first half year. The business in North America, acquired in November 2006, is winning some exciting new orders in a difficult market. The operations continue to work closely on building customer relations and promoting the division's global footprint.

Secure power and industrial

		2008 First Half £million		2007 First Half £million		2007 Full Year £million
Revenue		68.1		67.8		139.2
Operating profit		6.2		6.9		13.6

The secure power operations in Mexico and the UK have performed well. The additional facility in Mexico is nearly complete and the order book is healthy. The UK operation has suffered a slight setback with the loss of one contract; orders from new customers in Africa and the Middle East are expected to make up for this shortfall by the year end.

In the other industrial operations there has been a reduced demand for rapid response products from the UK Military but new orders from the US Military for connection systems have established a good start for the US operation.

New Chapel Electronics Limited, which was acquired on 2 April 2008, is being integrated with the UK connection systems operation and it is anticipated that both operations will benefit from the synergies and expanded markets being opened to both businesses.

Taxation

As anticipated, the effective tax rate has reduced to 26.0% compared with 27.9% for the full year 2007. The reduction is due to a change in the German corporate tax rate and overall mix of profits across the group.

Earnings per share and dividends

Basic earnings per share from continuing operations were 7.2p compared with 7.4p last half year. The interim dividend has been maintained at 3.69p per share.

Cash flow and borrowings

Cash generated from operations was £23.9 million (2007: £17.4 million) despite an increase in working capital due to higher sales in some companies and the build-up of inventory to prepare for summer shut-downs. The acquisition of New Chapel Electronics Limited for an initial consideration of £4.2 million and the payment of the final dividend of £9.9 million are other features of the first half cash flow. Net debt at 30 June 2008 was £84.3 million compared with £75.0 million at the start of the year and £83.5 million at June 2007.

Pensions

All of the significant pension schemes in the UK were merged last year. As part of the agreement to these changes TT electronics committed to a plan to eliminate the IAS19 deficit, as re-measured each year, by 2014 and the members agreed to bear a higher cost of their benefits.

The deficit under IAS19 was £20.7 million compared with £17.4 million at December 2007 and £33.0 million at June 2007. There were no special contributions in this half year but as part of the plan to eliminate the IAS19 deficit a special contribution of £2.1 million is expected in the second half.

Exposure to risk and uncertainties

Foreign currency

The group's main exposures are to changes in the exchange rate of sterling to the US dollar, the Euro and the Chinese yuan. The policy of the group is to manage, in a cost effective way, the effect of such exposures by hedging the risks. These hedges are achieved by matching foreign currency revenues with an equivalent foreign currency cost or by use of forward exchange contracts, swaps and other derivative instruments.

Price changes

The group's single largest exposure to the risk of changes in the cost of raw materials was to the change in price of copper metal. Following the disposal of the electrical cables business, this risk is substantially reduced. There are no other significant exposures to risks from changes in the cost of raw materials, but there remains an ongoing exposure to increases in the cost of utilities.

Interest cost

Since 2006 the group has maintained a cap to the interest cost on about one third of the total borrowings.

Commercial and other risks

The group is exposed to risks of product liability, credit risk, reliance on customers' commitments and other usual commercial risks. The group has a wide portfolio of products and operates in a number of market sectors, the largest of which is automotive, most importantly the German automotive OEMs. There are established control procedures in place to manage such risks, including production quality control, management and financial control procedures and insurance with reliable insurers, which are considered appropriate to the risk involved and the marketplace in which the exposure arises.

Outlook

The results for the first half represent a robust performance against a global economic downturn. Trading conditions for the second half are likely to be difficult with weaker demand, particularly for automotive sensors in Europe caused by a slowing down of the end market for these products. Specialist electronics products and secure power are expected to be resilient.

Geraint Anderson	Shatish D Dasani
Group Chief Executive	Group Finance Director
27 August 2008	27 August 2008

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'.

(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 2007 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
27 August 2008	27 August 2008

Condensed consolidated income statement

for the six months ended 30 June 2008

	Note	2008   First half £million	2007 First half £million	2007 Full year £million
Continuing operations
Revenue	3	292.0	270.5	544.9
Operating profit	4	17.2	18.9	37.7
Finance income	5	9.3	8.1	18.3
Finance costs	5	(11.5)	(11.0)	(22.7)
Profit before taxation		15.0	16.0	33.3
Taxation	6	(3.9)	(4.6)	(9.3)
Profit for the period from continuing operations		11.1	11.4	24.0
Discontinued operation
Loss for the period from discontinued operation	7	-	(14.5)	(11.8)
Profit/(loss) for the period attributable to shareholders		11.1	(3.1)	12.2
Earnings per share	8
From continuing and discontinued operations
- basic		7.2p	(2.0)p	7.9p
- diluted		7.1p	(2.0)p	7.8p
From continuing operations
- basic		7.2p	7.4p	15.5p
- diluted		7.1p	7.3p	15.3p
Dividend per share to be paid		3.69p	3.69p	10.05p

Condensed consolidated balance sheet

at 30 June 2008

	Note	2008 30 June £million	2007 30 June £million	2007 31 December £million
ASSETS
Non-current assets
Property, plant and equipment		117.2	106.5	112.0
Goodwill		55.3	51.9	52.3
Other intangible assets		19.8	16.1	17.3
Deferred tax assets		5.2	8.6	4.2
Total non-current assets		197.5	183.1	185.8
Current assets
Inventories		97.2	91.0	91.0
Trade and other receivables		108.8	95.8	95.1
Financial derivatives		-	0.1	-
Cash and cash equivalents		6.5	5.0	7.6
Total current assets		212.5	191.9	193.7
Assets of disposal group held for sale		-	20.6	-
Total assets		410.0	395.6	379.5
LIABILITIES
Current liabilities
Short-term borrowings		25.3	21.5	16.8
Financial derivatives		1.7	0.3	0.7
Trade and other payables		93.6	89.4	81.9
Current tax payable		3.0	3.0	-
Provision for liabilities		0.7	0.4	0.3
Total current liabilities		124.3	114.6	99.7
Non-current liabilities
Long-term borrowings		65.5	67.0	65.8
Deferred tax provision		6.0	5.3	6.0
Pensions and other post employment benefits	9	20.7	33.0	17.4
Other provisions		0.1	0.7	0.7
Other non-current liabilities		6.9	6.2	7.6
Total non-current liabilities		99.2	112.2	97.5
Liabilities of disposal group classified as held for sale		-	5.4	-
Total liabilities		223.5	232.2	197.2
Net assets		186.5	163.4	182.3
EQUITY
Share capital		38.7	38.7	38.7
Share premium account		0.2	-	0.2
Share options reserve		1.1	0.9	1.1
Hedging and translation reserve		3.4	(7.4)	(1.5)
Retained earnings		140.7	129.2	141.8
Minority interests		2.4	2.0	2.0
Total equity	10	186.5	163.4	182.3

Condensed consolidated statement of recognised income and expense

for the six months ended 30 June 2008

	2008   First half £million	2007   First half   £million	2007 Full year   £million
Profit/(loss) for the period	11.1	(3.1)	12.2
Exchange differences on net foreign currency investments	5.3	(1.2)	4.8
Hedging reserve	0.1	-	(0.2)
Actuarial (loss)/gain on defined benefit pension schemes	(3.3)	33.0	38.3
Deferred tax on pension deficit movement	0.9	(12.5)	(14.7)
Total recognised income and expense for the period	14.1	16.2	40.4

Condensed consolidated cash flow statement

for the six months ended 30 June 2008  

	Note	2008 First half £million	2007 First half £million	2007 Full year £million
Operating activities
Profit/(loss) for the period attributable to shareholders		11.1	(3.1)	12.2
Adjustments for
Finance costs		2.2	3.1	4.6
Taxation		3.9	4.6	8.3
Depreciation and amortisation		16.9	15.6	31.3
Gain on disposal of property, plant and equipment		(0.6)	(0.1)	(2.7)
Loss on disposal of business		-	13.5	12.3
Pension curtailment gain		-	(1.1)	(1.1)
Other non cash items (net)		(0.6)	-	(1.2)
Movement in working capital		(10.2)	(7.8)	(6.2)
Additional payments to pension funds		(0.4)	(6.3)	(15.7)
Exchange differences		1.6	(1.0)	1.1
Cash generated from operations		23.9	17.4	42.9
Tax paid		(1.5)	(2.9)	(7.3)
Net cash from operating activities		22.4	14.5	35.6
Cash flows from investing activities
Purchase of property, plant and equipment		(14.2)	(15.0)	(29.4)
Proceeds from sale of property, plant and equipment and grants received		2.3	3.3	7.1
Development expenditure and purchase of patents and licences		(5.4)	(5.0)	(10.1)
Acquisition of subsidiary net of cash acquired	11	(4.2)	-	-
Loan repayment		2.0	-	-
Net cash proceeds from sale of business		-	-	10.8
Net cash used in investing activities		(19.5)	(16.7)	(21.6)
Cash flows from financing activities
Net interest paid		(1.7)	(2.0)	(4.7)
Change in loans and finance lease liabilities		(0.3)	(0.1)	0.3
Issue of shares		-	-	0.2
Dividends paid		(9.9)	(9.9)	(15.6)
Net cash used in financing activities		(11.9)	(12.0)	(19.8)
Net decrease in cash and cash equivalents	12	(9.0)	(14.2)	(5.8)
Cash and cash equivalents at beginning of period		(5.2)	0.7	0.7
Exchange difference		(0.3)	0.1	(0.1)
Cash and cash equivalents at end of period	12	(14.5)	(13.4)	(5.2)
Cash and cash equivalents comprise
Cash and cash equivalents		6.5	5.0	7.6
Bank overdrafts		(21.0)	(18.4)	(12.8)
	12	(14.5)	(13.4)	(5.2)

Notes to the interim financial statements

1.    General information

The interim financial statements for the half year to 30 June 2008 are unaudited. The information for the year ended 31 December 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts has been delivered to the Registrar of Companies. The auditors report on those accounts was unqualified and contained no statements under section 237(2) or (3) of the Companies Act 1985.

2.    Basis of accounting

The annual financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements forming the interim financial statements has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'.

The same accounting policies, presentation, and methods of computation are followed in the interim financial statements as were applied in the Annual Report 2007.

3.    Analysis of revenue - continuing operations

		2008 First half £million	2007 First half £million	2007 Full year £million
By business sector
Sensors and electronic systems		101.4	90.7	182.3
Electronic components		70.5	67.5	131.2
Electronic manufacturing services		52.0	44.5	92.2
Secure power and industrial		68.1	67.8	139.2
Total revenue		292.0	270.5	544.9
By destination
United Kingdom		52.2	56.4	111.2
Rest of Europe		114.2	102.2	201.1
North America		69.7	72.6	149.5
Rest of the World		55.9	39.3	83.1
Total revenue		292.0	270.5	544.9

The group's primary reporting format is by business segments and its secondary format is by geographical segments.

4.    Analysis of operating profit

		2008 First half £million	2007 First half £million	2007 Full year £million
By business sector
Sensors and electronic systems		3.4	5.5	10.0
Electronic components		3.9	4.6	10.0
Electronic manufacturing services		3.7	1.9	4.1
Secure power and industrial		6.2	6.9	13.6
Operating profit		17.2	18.9	37.7

5.    Finance costs - net

	2008 First half £million	2007 First half £million	2007 Full year £million
Continuing operations
Interest payable	(2.1)	(2.4)	(5.0)
Interest on pension scheme obligation	(9.4)	(8.6)	(17.7)
Finance costs	(11.5)	(11.0)	(22.7)
Interest receivable	0.3	0.3	0.5
Expected return on pension scheme assets	9.0	7.8	17.8
Finance income	9.3	8.1	18.3
Finance costs - net	(2.2)	(2.9)	(4.4)

6.    Taxation

Taxation on the profit for the half year to 30 June 2008 has been based on an estimated effective rate of 26.0% for the full year ending 31 December 2008 (2007 full year: 27.9%).

7.    Discontinued operation

On 3 September 2007 the group sold the business and net assets of AEI Cables Limited, which was classified as a discontinued operation.

8.    Earnings per share

From continuing and discontinued operations:

		2008 First half pence	2007 First half pence		2007 Full year pence
Basic		7.2		(2.0)	7.9
Diluted		7.1		(2.0)	7.8

Earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of shares in issue during the period. The numbers used in calculating basic and diluted earnings per share are shown below:

		2008 First half £million	2007 First half £million	2007 Full year £million
Profit/(loss) for the period attributable to shareholders:
Earnings		11.1	(3.1)	12.2
		million	million	million
Weighted average number of shares in issue:
Basic		155.0	154.8	154.9
Adjustment for share options		0.3	1.7	1.5
Diluted		155.3	156.5	156.4

From continuing operations:

		2008 First half pence	2007 First half pence		2007 Full year pence
Basic		7.2		7.4	15.5
Diluted		7.1		7.3	15.3
		£million		£million	£million
Profit/(loss) for the period attributable to shareholders		11.1		(3.1)	12.2
Add loss for the period from discontinued operation		-		14.5	11.8
Earnings from continuing operations		11.1		11.4	24.0

The denominators are the same as shown above for basic and diluted earnings per share.

9.    Retirement benefit schemes

Following scheme mergers in 2007, the group now operates one defined benefit scheme in the UK. It also operates defined benefit schemes in the United States and Japan. All these schemes are closed to new members. Actuarial valuations of the schemes were carried out by independent qualified actuaries between 2003 and 2007 principally 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 2008. Pension scheme assets are stated at market value. The principal assumptions used for the purpose of the actuarial valuations were as follows:

		2008 30 June %	2007 30 June %		2007 31 December %
Discount rate		6.8		5.9	6.0
Inflation rate		3.8		3.2	3.2
Increases to pensions in payment		2.5-3.8		2.5-3.2	2.5-3.2
Salary increases for 3 years from 2006		-		-	-
Salary increases thereafter		4.3		3.7	3.7

The expected long-term rates of return on the main asset classes, net of expenses, set by management having regard to actuarial advice and relevant indices at 30 June 2008 were:

		2008 First half %	2007 First half %		2007 Second half %
Equities		7.2		7.0	7.9
Bonds		5.6		4.5	5.5
Gilts and cash		4.2		4.0	4.9

The mortality tables applied by the actuaries at 30 June 2008 and 31 December 2007 were PA92MC + two years.On the above basis the amounts recognised on the consolidated balance sheet are:

		2008 30 June £million	2007 30 June £million	2007 31 December £million
Fair value of assets		282.1	286.9	298.2
Present value of funded obligation		(302.8)	(319.9)	(315.6)
Net liability recognised on the balance sheet		(20.7)	(33.0)	(17.4)

A 0.1% change in the discount rate would change the present value of funded obligation by approximately £5 million.    

Costs recognised in the consolidated income statement are:

		2008 First half £million	2007 First half £million		2007 Full year £million
Current service cost		1.0		1.7	2.8
Interest on obligation		9.4		9.1	18.4
Expected return on plan assets		(9.0)		(8.3)	(18.5)

Changes in the present value of the defined benefit obligation are:

		2008 First half £million	2007 First half £million		2007 Full year £million
Opening defined benefit obligation		315.6		344.7	344.7
Current service cost		1.0		1.7	2.8
Interest on obligation		9.4		9.1	18.4
Scheme participant contributions		0.7		0.7	1.5
Curtailment		-		(1.1)	(1.1)
Change in actuarial estimates and assumptions		(16.4)		(28.5)	(37.8)
Benefits paid		(7.5)		(6.7)	(12.9)
Closing defined benefit obligation		302.8		319.9	315.6

Changes in the fair value of schemes' assets are:

		2008 First half £million	2007 First half £million	2007 Full year £million
Opening fair value of schemes' assets		298.2	272.1	272.1
Expected return on schemes' assets		9.0	8.3	18.5
Actual returns less expected returns		(19.7)	4.5	0.5
Contributions by employer		1.4	8.0	18.5
Contributions by employees		0.7	0.7	1.5
Benefits paid		(7.5)	(6.7)	(12.9)
Closing fair value of schemes' assets		282.1	286.9	298.2

The experience adjustments arising on the schemes' assets and liabilities are reported in the consolidated statement of recognised income and expense and are as follows:

		2008 First half £million	2007 First half £million	2007 Full year £million
Experience adjustments on schemes' liabilities		16.4	28.5	37.8
Experience adjustments on schemes' assets		(19.7)	4.5	0.5
Total actuarial (loss)/gain		(3.3)	33.0	38.3

10.   Summary of movements in shareholders' equity

	2008 First half £million	2007 First half £million	2007 Full year £million
Opening shareholders' equity	182.3	157.0	157.0
Profit for the period	11.1	(3.1)	12.2
Exchange differences on net foreign currency investments	5.3	(1.2)	4.8
Actuarial (loss)/gain (net) on defined benefit pension schemes	(3.3)	33.0	38.3
Deferred tax on pension deficit movement	0.9	(12.5)	(14.7)
Dividends paid	(9.9)	(9.9)	(15.6)
Share based payments	-	0.1	0.3
Premium on share issues	-	-	0.2
Cash flow hedges	0.1	-	(0.2)
Closing shareholders' equity	186.5	163.4	182.3

11.    Acquisition of subsidiary

On 2 April 2008 the group acquired the entire issued share capital of New Chapel Electronics Limited which designs and manufactures specialist interconnection systems and is based in the United Kingdom.

The net assets acquired and the goodwill arising are as follows:

		Book value £million	Fair value £million
Intangible assets		-	1.3
Property, plant and equipment		0.2	0.3
Inventories		0.7	0.7
Trade and other receivables		0.8	0.8
Trade and other payables		(0.9)	(1.0)
Tax payables		(0.1)	(0.1)
		0.7	2.0
Goodwill			2.9
Total consideration			4.9
Net outflow arising:
Cash consideration			4.1
Cash costs			0.1
Net cash outflow			4.2
Deferred consideration, capped at £1.0 million			0.7
Total consideration			4.9

The goodwill arises because the acquisition complements the group's existing interconnection systems business by providing improved sales channels to the high margin military and civil aerospace markets. New Chapel Electronics Limited is included in the secure power and industrial sector and contributed revenue of £1.2 million and operating profit of £0.1 million for the period since acquisition. If the acquisition had been made on 1 January 2008, revenue would have been £2.6 million and operating profit would have been £0.2 million.

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

		Net cash/ (overdraft) £million	Loans and finance leases £million	Net debt £million
Balance at 31 December 2006		0.7	(71.7)	(71.0)
Cash flow		(14.2)	0.1	(14.1)
Exchange differences		0.1	1.5	1.6
Balance at 30 June 2007		(13.4)	(70.1)	(83.5)
Cash flow		8.4	0.2	8.6
Exchange differences		(0.2)	0.1	(0.1)
Balance at 31 December 2007		(5.2)	(69.8)	(75.0)
Cash flow		(9.0)	0.3	(8.7)
Exchange differences		(0.3)	(0.3)	(0.6)
Balance at 30 June 2008		(14.5)	(69.8)	(84.3)

Net cash represents cash and cash equivalents less bank overdrafts.

13.    Dividend payment

Amounts recognised as distributions to equity holders in the period:

	2008 First half £million	2007 First half £million	2007 Full year £million
Final dividend for the preceding year of 6.36p per share	9.9	9.9	9.9
Interim dividend for the current year of 3.69p per share	-	-	5.7
	9.9	9.9	15.6

The interim dividend of 3.69p per share will be paid on 23 October 2008 to shareholders on the register on 17 October 2008. Shares will be ex-dividend on 15 October 2008.

14.    Related party transactions

The loan of £2.0 million to Newship Limited, a company in which J W Newman is interested, was repaid on 15 May 2008. There have been no other changes in the related party transactions described in the Annual Report 2007 that have a material effect on the financial position or results of the group.

15.    Post balance sheet event

On 21 August 2008 the group acquired assets comprising the majority of the business of Semelab Limited. The acquired business designs and produces specialised electronic components. The purchase consideration is £9.8 million in cash subject to an adjustment based on debt free net assets at completion of £6.2 million. Operating profit of the acquired business for the year to 31 October 2008 is expected to be approximately £1.0 million. No fair valuations of the assets acquired have yet been finalised for accounting purposes.

 

END

 

 

IR SEMFMMSASEDA