RNS Number : 5362Y
Senior PLC
25 February 2013
 



Results for the year ended 31 December 2012

Record results, with adjusted profit before tax up 17% to £91.1m.  Group outlook remains encouraging.

FINANCIAL HIGHLIGHTS

Year ended 31 December





2012


2011




REVENUE

£729.8m


£640.7m


+14%


OPERATING PROFIT

£94.5m


£83.0m


+14%

 

ADJUSTED OPERATING PROFIT (1)

£101.4m


£88.3m


+15%


ADJUSTED OPERATING MARGIN (1)

13.9%


13.8%


+0.1ppts


PROFIT BEFORE TAX

£86.7m


£72.7m


+19%


ADJUSTED PROFIT BEFORE TAX (1)

£91.1m


£78.0m


+17%


BASIC EARNINGS PER SHARE

17.11p


13.68p


+25%


ADJUSTED EARNINGS PER SHARE (1)

17.75p


14.55p


+22%


TOTAL DIVIDENDS (PAID AND PROPOSED) PER SHARE

4.65p


3.80p


+22%


FREE CASH FLOW (2)

£57.6m


£55.6m


+4%


NET DEBT (2)

£70.9m


£93.0m


£22m decrease


CONTINUING OPERATIONS:







                REVENUE

£712.0m


£622.3m


+14%


                OPERATING PROFIT

£93.7m


£82.0m


+14%

 

                PROFIT BEFORE TAX

£83.4m


£71.7m


+16%


(1)          Adjusted figures include the results from discontinued operations up to the date of disposal but are stated before loss on disposal of fixed assets of £0.1m (2011 - £0.3m), a £4.3m charge for amortisation of intangible assets acquired on acquisitions (2011 - £4.4m), a £1.9m pension curtailment charge (2011 - £nil), acquisition costs of £0.6m (2011 - £0.6m) and profit on disposal of business of £2.5m (2011 - £nil).  Adjusted earnings per share takes account of the tax impact of these items.

(2)          See Notes 11(b) and 11(c) for derivation of free cash flow and of net debt, respectively.

The Group's principal exchange rates for the US dollar and the Euro, applied in the translation of revenue, profit and cash flow items at average rates were $1.59 (2011 - $1.60) and €1.23 (2011 - €1.15), respectively.  The US dollar and Euro rates applied to the balance sheet at 31 December 2012 were $1.63 (2011 - $1.55) and €1.23 (2011 - €1.20), respectively.

Group Highlights

-

Robust underlying end market demand in both the Aerospace and Flexonics Divisions

-

A third consecutive year of record Group operating margins, now 13.9%

-

Adjusted profit before tax of £91.1m, 17% ahead of the prior year

-

Strong cash flows resulting in a continued prudent level of net debt

-

Excellent performance from Weston in first full year of ownership

-

GAMFG acquisition expands strategic customer base and precision machining capabilities in Flexonics

-

Portfolio optimisation and Flexonics margin enhancement via disposal of Senior Hargreaves

-

Full year dividend proposed to increase by 22%, in line with the growth in adjusted EPS

-

Group outlook remains encouraging

Commenting on the results, Mark Rollins, Group Chief Executive of Senior plc, said:

"2012 saw Senior deliver another year of record results.  Adjusted profit before tax increased by 17% and adjusted earnings per share by 22%, driven by revenue growth and a strong first year's performance from the recently acquired Weston business.  Continued healthy operating cash flows resulted in a net debt to EBITDA ratio of only 0.6 times at year-end, leaving the Group well placed to fund future organic and acquisitive growth.  Trading has been in line with expectations since the start of 2013 and this, combined with healthy longer-term prospects for the Group, gives the Board the confidence to recommend a 22% increase in the full year dividend for 2012, in line with the increase in adjusted earnings per share."

For further information please contact:

Mark Rollins, Group Chief Executive, Senior plc

01923 714738

Simon Nicholls, Group Finance Director, Senior plc

01923 714722

Philip Walters, RLM Finsbury Group

020 7251 3801

This Release represents the Company's dissemination announcement in accordance with the requirements of Rule 6.3.5 of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.  The full Annual Report & Accounts 2012, together with other information on Senior plc, may be found at: www.seniorplc.com

The information contained in this Release is an extract from the Annual Report & Accounts 2012, however, some references to Note and page numbers have been amended to reflect Note and page numbers appropriate to this Release.

The Directors' Responsibility Statement has been prepared in connection with the full Financial Statements and Directors' Report as included in the Annual Report & Accounts 2012.  Therefore, certain Notes and parts of the Directors' Report reported on are not included within this Release.

Note to Editors

Senior is an international manufacturing Group with operations in 13 countries.  It is listed on the main market of the London Stock Exchange (symbol SNR).  Senior designs, manufactures and markets high technology components and systems for the principal original equipment producers in the worldwide aerospace, defence, land vehicle and energy markets.

Cautionary Statement

This Release contains certain forward-looking statements.  Such statements are made by the Directors in good faith based on the information available to them at the time of the Release and they should be treated with caution due to the inherent uncertainties underlying any such forward-looking information.

CHAIRMAN'S STATEMENT

Senior delivered another strong operating performance during 2012, my first year as Chairman of the Company, and I am pleased to report adjusted profit before tax of £91.1m, an increase of 17% over the prior year.  Weston, the aerospace business acquired towards the end of 2011, delivered a better than expected first year's performance.  Group cash generation also remained strong.  Accordingly, in line with the Group's dividend policy, the Board is proposing a final dividend of 3.27 pence per share.  This would bring total dividends, paid and proposed, for 2012 to 4.65 pence per share, an increase of 22% over 2011.

These record results reflect the Group's strong niche market positions and the positive effect of the continual operational focus across the Group's 30 operating companies, 25 of which I have visited since joining the Board of Senior in March 2012.  In each case the enthusiasm and quality of the Group's employees, the standard of the factories and the culture of continuous improvement were good to experience first-hand.  Equally encouraging is the work being undertaken at many of the operations in developing products for new programmes and winning market share on others although  a number of these opportunities, because of the long-term nature of Senior's business, will not bring meaningful revenue for some years yet.

GAMFG Precision ("GA") is one of the operations I have not yet visited, the company having only been acquired by Senior in November 2012.  GA, located in Wisconsin, USA, represents an excellent strategic addition to the Group, with a well-established reputation for high-precision machining for the off-road heavy-duty diesel engine market as well as a growing presence in the commercial aerospace industry.  Atlas Composites ("Atlas"), a small UK-based developer of structural composite solutions for the Formula 1 and aerospace markets, is the most recent operation to join Senior, being acquired for £2.4m in February 2013.  It, like GA, brings new capabilities to the Group.  Senior Hargreaves, the Group's only construction market related business, was sold in October 2012 as part of the Group's strategic management of its operating company portfolio.  On behalf of the Board, I would like to extend a warm welcome to the employees of GA and Atlas and to thank all the Group's employees for their dedicated hard work during 2012.

I would also like to extend the Board's thanks and appreciation to Simon Nicholls, the Group's Finance Director for the past five years, who leaves Senior at the end of April 2013 to take up a similar role at Cobham plc.  Simon has made a significant contribution to the success of the Group during this time and we wish him well in his future career.  Recruitment of his successor is progressing well.

The Group operates in five strategic market sectors: three in Aerospace and two in Flexonics, with each sector offering healthy, and deliverable, growth opportunities.  The Group's strategy has been successful over recent years and, whilst the strategic planning process continues to evolve as the Group gets larger and market conditions change, it continues to provide a solid foundation for the Group's future growth aspirations.

As we enter the start of a new year, Senior's most important end-market, large commercial aerospace, remains strong and, although some other markets are anticipated to be more challenging, the Group continues to expect to make further progress during 2013.  Looking further ahead, a healthy number of new aerospace programmes going into production, together with expected market share gains in both the Aerospace and Flexonics Divisions, mean the outlook for Senior remains encouraging.

Charles Berry

Chairman

CHIEF EXECUTIVE'S STATEMENT

2012 Financial Results Summary

Total Group revenue increased by 14% to £729.8m (2011 - £640.7m) with Weston, the aerospace business acquired at the end of November 2011, delivering sales of £59.6m (2011 - £4.1m) in its first full year in the Group.  If Senior Hargreaves, which was sold in October 2012, is excluded then revenue from continuing operations increased by 14% to £712.0m (2011 - £622.3m).  Similarly, reported operating profit from continuing operations increased by 14% to £93.7m (2011 - £82.0m) and profit before tax from continuing operations increased by 16% to £83.4m (2011 - £71.7m).

Adjusted operating profit and adjusted profit before tax, the measures which the Board believes most accurately reflects the true underlying performance of the business, increased by 15% to £101.4m (2011 - £88.3m) and by 17% to £91.1m (2011 - £78.0m) respectively.  A full derivation of these measures is set out in the Financial Review.  Weston was responsible for around half of the Group's improvement in adjusted operating profit.  Adjusted operating margin increased, for the third year in a row, to 13.9% (2011 - 13.8%).

A lower underlying tax rate of 20.4% (2011 - 25.0%), offset partially by an increase in the number of shares in issue, helped adjusted earnings per share increase by 22% to 17.75 pence (2011 - 14.55 pence).  Basic earnings per share rose by 25% to 17.11 pence (2011 - 13.68 pence).

Once again, the Group demonstrated its highly cash-generative nature by delivering free cash flow of £57.6m (2011 - £55.6m) after increased net investment in capital expenditure of £26.0m (2011 - £21.8m).  As a result, the level of net debt at the end of 2012 of £70.9m was substantially below the £93.0m at the start of the year, even after expending £28.1m on the acquisition of GA in November 2012.  This year-end net-debt level represents 0.6 times (31 December 2011 - 0.8 times) earnings before interest, tax, depreciation and amortisation ("EBITDA"), leaving the Group well placed to fund future organic and acquisitive growth.

Dividend

The Board is recommending a final dividend of 3.27 pence per share (2011 - 2.65 pence) which, if approved, would cost £13.5m (2011 final dividend - £10.7m) and would be paid on 31 May 2013 to shareholders on the register at close of business on 3 May 2013.  This would bring the total dividends, paid and proposed, in respect of 2012 to 4.65 pence per share, an increase of 22% over 2011 in line with the increase in adjusted earnings per share.  At the level recommended, the full-year dividend would be covered 3.8 times (2011 - 3.8 times) by adjusted earnings per share.

Delivery of Group Strategy

The Group operates in five strategic market sectors: three in Aerospace - Structures, Fluid Conveyance Systems and Gas Turbine Engines, and two in Flexonics - Land Vehicle Emission Control and Industrial Process Control.  Each strategic market sector offers healthy, and deliverable, growth opportunities.  Senior's products are typically single sourced, highly engineered and require advanced manufacturing processes for their production.

The Group Business Model and Group Strategy are set out in more detail below, with significant progress being made during 2012 in delivering the stated strategy.  In addition to the progress made in improving the financial performance of the Group and increasing shareholder value, the Group continued to enhance its operating company portfolio, invest in new product development, technologies and geographies and reinforce its entrepreneurial culture whilst still maintaining a strong control framework.

The acquisitions of GA and Atlas have added further high-precision machining and structural composite capabilities to the Group.  When combined with the global reach, financial strength and key customer relationships of the existing Senior operations, these acquisitions offer significant additional commercial synergies that will enhance the performance of the Aerospace and Flexonics Divisions over the coming years.  The disposal of Senior Hargreaves, the Group's only construction market related business, has provided further focus to the Flexonics Division's activities as well as improving its adjusted operating margin, which at 15.4% for 2012, is now on a par with the performance of the Aerospace Division.

2012 also saw notable progress on extending the Group's global footprint: a joint venture was set up in Wuhan, China, for the production of heavy-duty diesel engine common rails for the domestic Chinese truck market; an exhaust connector manufacturing cell began production in Mexico to serve a local heavy-truck manufacturer; and significant investment was made in Thailand to increase aerofoil machining capacity for existing and future customers.

Successfully delivering targeted acquisitions is one of the Group's six key growth drivers, with the others being: higher global GDP; gaining market share; the impact of increasing environmental legislation; winning healthy content on new programmes; and the increase in the build rate of large commercial aircraft, which market represents 33% of Group revenue.  As explained in the Divisional Business Reviews good progress was made during 2012 in taking products from the design and development stage through to initial production on a number of new programmes and towards winning further meaningful market share in both Divisions.  A number of these opportunities are expected to be awarded during 2013.

Whilst the achievements of Senior over recent years provide tangible evidence of success in implementing the Group's stated strategy, it is very important that this strategy continues to evolve and be updated as the Group grows and markets, technology and global economics change.  As a consequence, 2012 saw an increased emphasis on the strategic planning process with improvements being made at the operating company, Divisional and Group level.  This focus is expected to continue during 2013.

Employees and the Board

As a result of healthy organic growth and the acquisition of GA, the Group's headcount increased to 6,171 at the end of 2012 (31 December 2011 - 5,878).  Excluding the effect of GA and the disposal of Senior Hargreaves, underlying headcount increased by 126 people or 2% of the workforce.

The Group's employees are one of its most valuable assets, with the financial and operational progress made during 2012, and earlier years, largely due to their hard work and dedication.  In recognition, Senior has sought to improve employee development at all levels of the organisation, from increasing the frequency and range of shop-floor health and safety "tool-box talks" to expanding the Group Development Programme for its future leaders and investing in specialist strategic leadership courses for its most senior executives.  Employee development, together with a renewed focus on the recruitment and succession planning processes, will remain an important focus for the Group in the future.

As planned, Charles Berry joined the Board on 1 March 2012 and took over from Martin Clark as the Company's Chairman at the conclusion of the Group's Annual General Meeting on 27 April 2012.  Martin had served on the Board for 11 years, the last five as its Chairman, firstly assisting the Group's turnaround as a non-executive Director and then ably supporting the executive management team in successfully growing the business during his tenure as Chairman.  Charles brings a broad experience of listed companies and industrial markets, most recently as Chairman of Drax Group plc, and has made a strong contribution to the governance and strategic direction of Senior in his first year with the Group.

After five years as the Group Finance Director, Simon Nicholls has decided to take up a similar role with Cobham plc, starting at the end of April 2013.  Simon has made a significant contribution to the success of Senior during this time and I, together with my executive colleagues, have enjoyed and appreciated working alongside him.  We wish him well in his future career.  The recruitment process for his replacement is progressing well with an appointment expected to be made from outside the Group in due course.

Outlook

The first few weeks of 2013 have seen the Group perform in line with the Board's expectations.  The Flexonics Division is benefiting from solid sales to the North American heavy-truck market, but being impacted by weakening European passenger vehicle production, and the Aerospace Division is seeing healthy volumes from large commercial aircraft but a continuing decline in the military and defence market.  Engineering activity remains high as work gathers pace to design and produce products for early stage test aircraft and engines for new aircraft programmes, such as the CSeries, A320neo, and A350, and also exhaust gas recycling ("EGR") cooler prototypes for potential new heavy-truck engine customers.  These high levels of engineering cost are anticipated to peak in the first half of 2013.  The construction of a new UK facility to accommodate Weston's growing aerospace structures business is due to be completed in spring 2013 and the business relocated over the following months, with the majority of the costs being incurred in the first half.  The Board consequently expects a stronger operating performance in the second half of the year than the first, on the assumption that North American heavy-truck volumes gradually improve from current levels, aircraft build rates, notably the Boeing 787, ramp up as planned and the expected orders for large industrial expansion joints materialise in the coming months.  Overall, the Board continues to anticipate that the Group will perform in line with its expectations and make further progress in 2013.

Looking further ahead, the new aircraft programmes mentioned above, along with others on which the Group has, or can expect to have, healthy content such as the A400M military transporter, Joint Strike Fighter, Mitsubishi Regional Jet and Boeing 737 MAX, are all anticipated to come into service in the coming years and provide strong growth opportunities for the Group.  In Flexonics, substantial progress has been made in positioning the Group to win another EGR cooler customer, the acquisition of GA is already presenting cross-selling opportunities and a healthy number of large expansion joint projects are now reaching the tendering stage.

Customers in both Divisions are increasingly looking at consolidating their supply chain and placing more work with suppliers like Senior who are financially strong, operationally focused and have a global footprint, with the Group's operations in Mexico, China and Thailand generating healthy levels of interest at present.  Environmental legislation also continues to tighten across the globe, driving greater demand for the Group's land vehicle products and the development of more fuel-efficient passenger aircraft on which Senior has potential content.

As well as the organic growth opportunities mentioned above, Senior's cash-generative nature and strengthening market and financial position provide a solid platform from which the Group can continue to pursue acquisitive growth opportunities on a targeted basis.  Such activity has proven to be successful in recent years, providing growth and enhancing shareholder value, and the opportunity remains for it to continue to be so in the future when carried out in a controlled and prudent manner.

Whilst Senior will undoubtedly face challenges as it pursues its growth agenda, the opportunities and reputation that the Group is developing mean the prospects for the future remain encouraging.

Mark Rollins

Group Chief Executive

BUSINESS MODEL

The Group's business model is designed to create long-term sustainable growth in shareholder value.  It comprises six key elements and is supported by the Group's core values, culture and common control framework.  The six key elements are:

1.

Operational Excellence

Senior's long-standing emphasis on operational excellence is based on the principles of Lean, striving at all times for continuous improvement and the elimination of non-value-added activities and processes.  Success in this area is one of the principal reasons for the Group's significant improvement in financial performance over recent years.

2.

Optimising Customer Value and Fulfilling Expectations

The Group seeks to deliver competitive products utilising its engineering expertise to optimise customer value and fulfil their expectations whilst continuing to meet its performance objectives.

3.

Effective Business Development

Provision of innovative, market-leading solutions for customers in the Group's chosen principal market sectors (each exhibiting fundamental macro long-term growth characteristics), is the key driver of effective business development.  This consistently creates new opportunities for additional programme wins and market share gains, often for products or systems that assist the improvement of fuel efficiency in aircraft and land vehicle engines, or to help meet increasingly stringent global emission control regulations.

4.

Investing in Personnel Development

Continually developing the capabilities and competencies of its personnel, to support its primary performance objectives, is critical to Senior's future success.  The Group has increased its investment in management development and training significantly in recent years, seeking to enhance underlying performance and in particular strengthen business development and operational management whilst also maintaining the strength of Senior's underlying entrepreneurial culture.

5.

Developing AN Integrated Global Footprint

Senior continues to develop an integrated global commercial and operational footprint to enable it to supply key programmes to its OEM customers cost-effectively and to meet growing domestic demand in emerging markets.

6.

Expanding Capabilities

The Group's strong level of free cash flow generation allows it to target a select number of complementary strategic acquisitions in growth markets to expand its capabilities, accelerate growth and enhance its asset portfolio.

STRATEGY

The Group's primary performance objective is to create long-term sustainable growth in shareholder value.  It aims to achieve this objective through the development of a portfolio of collaborative high value-added engineering manufacturing companies within its five market sector framework, that are capable of producing sustainable real growth in operating profit and cash flow, and that consistently exceed the Group's cost of capital.  At Group level, there are four key principles to Senior's strategy:

1.

OPTIMISING VALUE

Optimising the value of the Group's existing operations portfolio by consistently meeting customer expectations through advanced process engineering and excellent operational execution, leading to market differentiation and continued growth in organic revenue, operating margins and cash flow delivery.

The Group has enjoyed increasing success in recent years, driving value creation through the implementation of its operational excellence initiatives based around Lean principles and sustained superior performance in the eyes of its customers.  This is the principal reason that, at 13.9% in 2012, the Group's adjusted operating margin is at record levels, having more than doubled since 2006.

2.

TARGETED INVESTMENT

Targeted investment in new product development, technologies and geographic regions, for markets having higher than average growth potential, to further enhance organic growth opportunities.

Many of the Group's products are developed to help customers achieve their objectives for improved operating costs, particularly fuel efficiency in aircraft platforms and land vehicle engine applications, and to meet increasingly stringent global emission regulations.  The Group's level of investment in these growth areas and on expanding its geographic footprint, which now includes Thailand and China, continues to increase.

3.

PORTFOLIO ENHANCEMENT

Portfolio enhancement through focused acquisitions and disposal of non-core assets, with decisions in both cases being subject to strict financial criteria, the operation's long-term outlook and the Group's anticipated funding position.

The Group has a good track record of acquiring and successfully integrating new businesses, and also of rationalising and enhancing the overall asset portfolio through disposals, utilising a framework that has been developed as part of the strategic planning process.  The key enabler of this programme is the significant balance sheet capacity that has been generated in recent years through strong free cash flow generation.  In 2012, the Group acquired one business and made one disposal, both in the Flexonics Division, and a small Aerospace acquisition was completed in February 2013.  Further details of these transactions are given in the Divisional Review and Notes 13, 14 and 16.

4.

CORPORATE CULTURE

Creating an entrepreneurial culture within a strong control framework and continuously striving for improvements amongst its operating businesses, whilst operating in a legal, safe and socially responsible manner.

The Group's culture is based around empowerment of its autonomous operations within a well-defined control framework, whilst also promoting collaboration to support best practice sharing and to provide more complete customer programme solutions.  Governance procedures are designed to allow each operation to embrace and manage key risks effectively, and to comply with all legal and regulatory requirements, without imposing an unnecessary administrative burden.  They also aim to ensure that all employees act at all times safely, with integrity and in an ethical manner.  Further details are contained in the Corporate Social Responsibility report on pages 32 to 34 of the Annual Report and Accounts 2012.

STRATEGIC OBJECTIVES

The application of the Group's four key principles in strategy formulation and implementation outlined above has resulted in the development of the following strategic objectives in each of the Group's five key market sectors.  The Group's progress against these objectives is also included in the table below:

 

Strategic objectives

Progress

Structures


·    Extend customer base via increased collaboration

·    Continue focus on operational excellence to drive customer value and increase market share

·    Develop capabilities and build a business of increased scale in Thailand

·    Expand process capabilities to enhance added value for customers

·    Invest in new technologies to complement growth

·    New programme wins with Bell Helicopters in Mexico and Connecticut, and Woodward in Washington state

·    Acquired land in Thailand for potential expansion of Structures operation in SE Asia

·    Additional hard metal and precision machining and process capabilities have been acquired.  Adding further processing capabilities is under review

·   Potential exists for complementary expansion into structural composites

Fluid conveyance systems


·    Growth through content on new platforms

·    Further develop strategic customer relationships

·    Successful introduction of new programmes

·    Expand engineered product portfolio

·    Acquire new or adjacent technologies

·    Development contracts for ducting components secured for the engines that will power the A320neo and B737 MAX, due to enter service in 2015 and 2017 respectively

·    Increased investment in engineering and programme management to ensure new programmes enter production profitably

·    Acquisition of Atlas in February 2013 brings additional and adjacent composite capabilities

Gas turbine engines


·    Target higher value-added engineered or flight critical parts (e.g. rotating)

·    Develop cross-business customer relationships

·    Further develop low-cost country footprint

·    Secure further content on engines for next generation narrow body and wide body commercial aircraft

·    Expand process capabilities via new technology investment or acquisition

·    First rotating parts won as part of outsourcing contract from Rolls-Royce.  Further products being targeted at other customers

·    Acquisition of GA brings new precision machining capabilities to enhance potential cross-business customer relationships

·    New programme aerofoils now being manufactured in Thailand, with additional opportunities being developed with existing and new customers

·    Development contracts for fuel system components secured for the engines that will power the A320neo and B737 MAX.

Land vehicle emission control


·    Develop product portfolio as emission regulation thresholds increase

·    Invest further in emerging market footprint, in growth markets

·    Capitalise on expanded capabilities following acquisition of GA

·    Continue to invest and expand in heavy-duty truck/off-highway sector

·    Investment in passenger car niches to support development of global platform capabilities

·    Continued investment in heat exchanger technology resulting in increased presence on latest generation of heavy-duty diesel engines, via EGR coolers, in North American and European markets

·    Investment in emerging market operations to support new programme wins for EGR tubes and other components as emission regulations are tightened

·    Acquisition of GA brings significant opportunities for cross-business commercial synergies with existing businesses in both on-road and off-road applications

·    New joint venture in China brings further expansion of global footprint to support global platform requirement for existing and new land vehicle customers

Industrial process control


·    Expand global presence via offshore partners for large projects

·    Secure growth from tightening emission standards in developed markets

·    Seek proprietary adjacent products

·    Participate in new technology developments and applications (e.g. combined heat and power, concentrated solar power)

·    Collaboration between Group operations in USA, Canada and Brazil results in improved competitiveness and execution

·    Increase in new work awarded as a result of emission regulations enacted in the US leads to additional damper contract awards

·    Increased sales of fuel cell components in USA

·    Focus on additional proprietary adjacent products in existing and emerging markets

·    Additional concentrated solar power contracts awarded in Europe and USA

 

The Group uses five financial and two non-financial metrics to measure progress in implementing its strategy (as described more fully above).  The Group's financial objectives are as follows:

to achieve organic sales growth in excess of the rate of inflation;

to increase adjusted earnings per share on an annual basis by more than the rate of inflation;

to increase the Group's return on revenue margin each year;

to generate sufficient cash to enable the Group to fund future growth and to follow a progressive dividend policy; and

to maintain an overall return on capital employed in excess of the Group's cost of capital and to target a pre-tax return in excess of 15%.

These financial objectives are supported by two non-financial objectives:

to reduce the Group's rate of energy intensity by 10% in the five-year period to 2015; and

to reduce the number of recordable injuries which incur lost time by 20% in the five-year period to 2015.

Senior delivered record profits in 2012 and all of the Group's financial targets were met.  The Group's energy intensity target was also met and the Group remains on track to meet its 2015 safety improvement goal, although progress in 2012 was below expectations.  Further details of the Group's performance record in this regard, including its long-term performance trends, are shown on pages 32 to 34 of the Annual Report and Accounts 2012.

A summary of the year-on-year movements in these Key Performance Indicators ("KPIs"), the main drivers of the changes and the respective link to the key strategic principles outlined above, are described below.

KPI

Growth

Progress

Principle

Organic revenue




£648.8m

(2011 - £612.7m)

+6%

The main drivers of organic revenue growth in the Aerospace Division were increased build rates on large commercial aircraft programmes, as well as additional demand in the Group's business jet programmes and in military markets on the Joint Strike Fighter programme.  In Flexonics, demand for truck engine components in North America improved and increases in organic revenue were also achieved in global petrochemical and in US power and energy markets.

1,2

Adjusted earnings per share




17.75 pence

(2011 - 14.55 pence)

+22%

Increased revenue, resulting from the Weston acquisition and strong underlying market demand in most of the Group's end-markets, combined with continued effective operational execution and a reduced tax rate, arising principally due to changes in geographical profit mix, resulted in a significant increase in adjusted earnings per share in 2012 of 22%.

1,2

Return on revenue margin




13.9%

(2011 - 13.8%)

+0.1

PPTS

A record Group adjusted operating profit margin of 13.9% was achieved in 2012.  The increase was primarily attributable to improved operational efficiency across the Group, but in particular in the Flexonics Division, which resulted in the positive impact of increases in revenue being translated into improved underlying Group profitability.

1,2

Net cash from operating activities




£83.3m

(2011 - £77.1m)

+8%

The Group's cash conversion was again very strong, with net cash from operating activities increasing by 8% to a record level of £83.3m in 2012.  The main drivers of this result were the increase in Group profitability, and continued effective control over working capital which remains below 10% of annualised sales.  As a result, the Group has been able to fund an increased level of capital expenditure of 1.3 times depreciation and propose a 22% increase in the annual dividend.

1,2,3

Return on capital employed




26.9%

(2011 - 26.8%)

+0.1

PPTS

The Group maintained its record level of return on capital employed in 2012 close to 27%.  This was achieved through a combination of earnings enhancements and continued balance sheet efficiency, in particular increased earnings from acquisitions, effective allocation of capital expenditure and asset utilisation on profitable growth programmes, as well as continued effective control over working capital requirements at operational level.

1,2,3,4

Carbon dioxide emissions




92 tonnes / £m revenue

(2011 - 94 tonnes / £m revenue)

2% improve-ment

Through more efficient use of resources and improved asset utilisation, the Group continues to make good progress on its published five-year target of improving energy efficiency by 10% between 2011 and 2015. This is the seventh consecutive year that Senior has reduced its environmental impact.

4

Lost time injury frequency rate




1.36 incidents per 100 employees p.a.

(2011 - 0.98 incidents per 100 employees p.a.)

Increased

by 0.38

incidents

per 100

employees

p.a.

The number of lost time injuries increased to 1.36 per 100 employees in 2012, due to the inclusion of acquired businesses and an increase in incidents in organic operations in the Flexonics Division.  This disappointing result is the first annual increase since the Group launched its current HSE programme in 2006.  The Group continues to take a proactive approach to the health and safety of all employees, as described more fully in the Corporate Social Responsibility report on pages 32 to 34 of the Annual Report and Accounts 2012, and despite the increase in incidents this year has more than halved the number of lost time injury incidents since 2006.

4

The Group has had considerable success in implementing its strategy in recent years.  A summary of the movements in the Group's KPIs since 2006 is set out in the table below:


Average annual movement
2006 to 2012

Organic revenue growth (1)

+5% p.a.

Adjusted earnings per share growth (2)

+28% p.a.

Return on revenue margin increase (3)

+1.2 ppts p.a.

Net cash from operating activities (4)

+30% p.a.

Return on capital employed increase (5)

+2.2 ppts p.a.

CO2  emissions / £m revenue (6)

-3% p.a.

Lost time injury frequency rate (7)

0.24 fewer incidents p.a.

 

(1)

Organic revenue growth is the rate of growth in Group revenue, at constant exchange rates, excluding the effect of acquisitions and disposals.

(2)

Adjusted earnings per share is the profit after taxation (adjusted for the profit or loss on disposal of fixed assets, amortisation of intangible assets arising on acquisitions, acquisition costs, pension curtailment charge and profit on disposal of business) divided by the average number of shares in issue in the period.

(3)

Return on revenue margin is the Group's adjusted operating profit divided by its revenue.

(4)

Net cash from operating activities is the Group's free cash flow before interest and net capital expenditure.

(5)

Return on capital employed is the Group's adjusted operating profit divided by the average of the capital employed at the start and end of the period.  Capital employed is total assets less total liabilities, except for those of an interest-bearing nature.

(6)

CO2 emissions / £m revenue is an estimate of the Group's carbon dioxide emissions in tonnes divided by the Group's revenue in £m.

(7)

Lost time injury frequency rate is the number of OSHA (or equivalent) recordable injury or illness cases involving days away from work per 100 employees.

All KPIs were calculated as the simple average of year-on-year movements in these KPIs over the period 2006 - 2012.

DIVISIONAL REVIEW

Aerospace Division

Market Overview

Demand in the large commercial aircraft sector, Senior's largest aerospace market exposure, remains strong with order books at record levels.

Large commercial aircraft

Total revenue growth of 50% including acquisitions, with organic revenue growth of 15% underpinned by increasing build rates in Airbus and Boeing large commercial aircraft platforms

Build rates on most major platforms expected to increase in 2013 and beyond

Boeing delivered 46 B787s in 2012 as the build rate increased to five per month during the year as planned

Strong order intake for Boeing and Airbus again in 2012, in particular for re-engined narrow body A320neo and B737 MAX platforms, where total orders now stand at 2,798 aircraft, and which are due for delivery in 2015 and 2017 respectively

Total OEM order books remain at record levels, representing over seven years of production at current build rates

Military aerospace

Revenue increased by 7%, reflecting a robust footprint on well-established platforms and increased activity on new programmes such as the F-35 Joint Strike Fighter

Demand on the Group's main military programmes, the C-130J transport aircraft and the Black Hawk helicopter, held up well for most of the year although began to weaken in the fourth quarter

Short-term outlook on a number of platforms is weaker, with likelihood of reduced build rates due to downward pressure on US defence expenditure

Healthy shipset content on new programmes such as the A400M transport aircraft, the P-8A Poseidon naval reconnaissance aircraft and the F-35 Joint Strike Fighter should partially mitigate the impact of any reduction in funding that may affect established programmes

Regional and business jets

Business jet revenue growth of 12%, ahead of the market, due to increased demand from large cabin platforms (e.g. Bombardier Challenger and Gulfstream G650)

Revenue from regional jet sector broadly unchanged with markets weaker but Senior's performance aided by recoverable development expenditure on new platforms

Continued modest recovery in business jet sector is forecast for 2013, with regional demand remaining subdued

Senior's regional jet market revenue is likely to increase in the medium-term as new platforms come to market, such as the Bombardier CSeries and Mitsubishi MRJ

Business Review

The Aerospace Division consisted of 18 operations throughout 2012.  These are located in North America (11), the United Kingdom (three), continental Europe (three) and Thailand.  In addition, after the year-end, the Group acquired Atlas Composites Limited ("Atlas"), a small UK-based developer and manufacturer of composite structural products, bringing new capabilities into the Group.

In 2012, the Division accounted for 66% (2011 - 61%) of continuing Group revenue.

The Aerospace Division's main products are engine structures and mounting systems (28% of 2012 divisional sales), airframe and other structural parts (25%), metallic ducting systems (18%), helicopter machined parts (7%), composite ducting systems (7%) and fluid control systems (5%).  The remaining 10% of divisional sales were to non-aerospace, but related technology markets, including the energy, semi-conductor and medical markets.  The Division's largest customers include Boeing, representing 16% of 2012 divisional sales, Rolls-Royce (15%), United Technologies (11%), Spirit AeroSystems (10%), Airbus (4%), Bombardier (4%) and GKN (3%).

Increasing build rates of large commercial aircraft, together with the inclusion of Weston for the first time, resulted in the Aerospace Division delivering a healthy performance during 2012.


2012


2011

(1)

Change

£m


£m



470.5


382.4


+23%

72.1


59.9


+20%

15.3%


15.7%


-0.4ppts

(1)

2011 results translated using 2012 average exchange rates.

Divisional revenue increased by £88.1m (23%) to £470.5m (2011 - £382.4m at constant currency) and adjusted operating profit increased by £12.2m to £72.1m (2011 - £59.9m at constant currency).  Excluding the impact of acquisitions, revenue for the Division increased by 7% and adjusted operating profit increased by 10%.  Whilst the operating margin declined slightly to 15.3% (2011 - 15.7%), this was principally due to the inclusion of the currently lower margin Weston business as, excluding the effect of acquisitions, the margin increased to 16.0% (2011 - 15.7%).

51% of the Aerospace Division's revenues are derived from the large commercial aerospace market, comprising the aircraft manufactured by Airbus and Boeing and the engines that go on those aircraft.  This market remained very strong during 2012 with Boeing and Airbus collectively delivering 1,189 aircraft, an 18% increase over the prior year (2011 - 1,011 deliveries).  Boeing and Airbus also recorded strong aircraft orders during 2012 which, at a combined net order intake of 2,036 aircraft (2011 - 2,224 aircraft), was well ahead of aircraft deliveries for the third year in succession.  As a consequence, their combined order book grew by nearly 850 aircraft during 2012 to 9,055 aircraft at the end of the year, representing well over seven years of deliveries at current production rates.  Due to the strong markets and a full-year contribution from Weston, Senior grew its sales to the large commercial aircraft market by 50% during 2012, with organic growth being 15%.

Equally encouraging was the success Senior had in winning additional content on the A350 and B787, two significant future programmes for the Group with the Airbus A350 due to fly for the first time during 2013 and Boeing planning to double the production rate of the B787 from the current 5 per month to 10 per month by early 2014.  Whilst Boeing has temporarily stopped delivering the B787 to its customers, pending an investigation into an electrical fault, both they and their customers remain highly confident in the long-term future of the B787 aircraft, given its enhanced fuel-economy and passenger comfort.  As a consequence, Boeing continues to manufacture the aircraft at the planned production rate and, to date, there has been no effect on the Aerospace Division's financial performance.

The smaller Airbus A320 and Boeing 737 aircraft are the highest volume commercial aircraft platforms, representing 73% (by number) of all commercial aircraft delivered during 2012, and as a result they are currently the most important programmes for Senior by value.  Both aircraft are currently being redesigned to accommodate modern, more fuel-efficient, aircraft engines with the new aircraft being designated as the A320neo and B737 MAX, respectively.  These aircraft, which are scheduled to come into service in 2015 and 2017 respectively, represent an excellent opportunity for Senior to increase its shipset content.  Encouraging progress was made in this regard during 2012, with the Group now anticipating having at least 50% more content on the A320neo than the A320 and for the B737 MAX content to be greater than that on the current B737.

The Aerospace Division recorded a 7% increase in revenue from the military and defence sector during 2012, despite the declining end-markets in North America and Europe, with the F-35 Joint Strike Fighter seeing increased activity for Senior and the Weston acquisition making an initial contribution.  Whilst the 2012 outcome was highly satisfactory, the Group saw revenue from the Black Hawk helicopter programme start to decline in the second half of the year and an announcement that production volumes for the C-130J military transport aircraft would decrease by at least 35% in 2013.  These are the Group's two highest-value military programmes and it is unlikely that growing volumes on other platforms, such as the A400M transporter and P-8A reconnaissance aircraft, will fully offset these reductions in the near future.  As a result, it is expected that the military and defence sector, which represented 25% of Aerospace divisional revenue in 2012, will decline in its relative importance during 2013.

The business jet sector represented around 9% of divisional sales in 2012 and due to the Group's greater exposure to newer and larger business jets, rather than smaller and older aircraft, revenue derived from this sector increased by 12% over 2011, despite 2012 deliveries of business jet aircraft declining by 3% to 672 aircraft (2011 - 696 aircraft).  The 2012 delivery level is now approximately half the level seen at the peak in 2008, when 1,315 business jets were delivered, with the expectation that the industry will now see a slow and gradual improvement over the coming years.  In the regional jet sector, a beneficial mix and revenue being earned from development work on new programmes, such as the Mitsubishi regional jet, meant that the Group recorded broadly unchanged revenue in 2012, despite the two largest manufacturers, Bombardier and Embraer, seeing a 24% decline in their combined regional jet deliveries.  Bombardier's largest ever commercial aircraft, the CSeries, is due to fly for the first time during 2013 and because the Group has a large content on this aircraft ($448k per aircraft), its potential future commercial success would be advantageous for the Group.

Around 11% of the Aerospace Division's revenue is derived from other markets such as space, non-military helicopters, power and energy, medical and semi-conductor where the Group manufactures products using very similar technology to that used for certain aerospace products.  Overall, these markets were slightly lower in 2012, with power and energy and semi-conductor seeing some year-on-year weakness.

Flexonics Division

Market Overview

Senior's principal end-market exposures in the Flexonics Division are to medium- and heavy-duty diesel engine markets in North America, passenger cars in Europe and to global industrial process control markets including petrochemical, HVAC and power and energy markets.

Land vehicle emission control

Total truck and off-highway sales increased by 20% principally due to increased production of medium- and heavy-duty truck engines in North America

Group sales to European truck programmes grew by 5% despite weak end markets

Expansion of capabilities via acquisition of GA in November 2012, bringing precision machining capabilities and potential customer synergies

Formation of a joint venture in China is an important expansionary step for the Group's footprint in emerging markets

The Group commenced assembly of flexible exhaust connectors in Mexico to supply a key customer's local production plant and its US facilities

Sales in the passenger car sector declined by 13% due to reduced demand in European markets and slight declines for the Group's products in Brazil and the USA

Industrial process control

Industrial revenues increased by 8% reflecting robust demand in petrochemical markets in Asia and the start of a potential recovery in demand in US power generation markets

First damper order delivered in Brazil, into the steel industry.  Further opportunities are in development

European industrial markets remained subdued for most of the year

Disposal of non-core Senior Hargreaves in October 2012 enhances the return from the industrial portfolio and significantly reduces the Group's exposure to European HVAC markets

Additional contracts were won for concentrated solar power plants in the USA and Europe for the benefit of 2012 and 2013

Business Review

Following the acquisition of GAMFG Precision ("GA") in November 2012 and the setting up of the Chinese joint venture in August 2012, the Flexonics Division now has 12 operations.  These are located in North America (four), continental Europe (three), the United Kingdom, South Africa, India, Brazil and China.

In 2012, the Flexonics Division accounted for 34% (2011 - 39%) of continuing Group revenue.  The percentage of Group sales arising from the passenger vehicle sector declined to 8% in 2012 (2011 - 12%) with sales to the heavy-duty diesel engine market increasing to 10% (2011 - 9%).  Sales to industrial markets represented 16% of Group revenue in 2012 (2011 - 18%).

The land vehicle sales comprise cooling and emission control components (26% of 2012 divisional sales), flexible mechanisms for vehicle exhaust systems (17%), diesel fuel distribution pipework (9%) and off-highway hydraulics (1%).  The industrial product revenue is derived from the power and boiler markets (19%), oil and gas and chemical processing industries (13%), HVAC and solar markets (5%) and a range of other markets (10%).

The Division's largest individual end users are land-vehicle customers, including Cummins (representing 19% of 2012 divisional sales), Ford (5%), PSA (5%), General Motors (4%), Renault (3%) and Caterpillar (3%).  Individual industrial customers rarely account for more than one or two per cent of divisional sales and, given the generally bespoke and project nature of the Group's industrial products, the customers vary significantly each year.  Bloom Energy and a single expansion joint project in Tianjin, China, each accounted for 3% of divisional sales in 2012.

Many of the Flexonics Division's end-markets saw little growth during 2012 due to generally challenging global economic conditions, particularly in Europe, and so it is pleasing to report a much improved financial performance for the Division.

 

Continuing Operations

2012


2011

(1)

Change

£m


£m



242.0


230.7


+5%

37.3


33.3


+12%

15.4%


14.4%


+1.0ppts

(1)

2011 results translated using 2012 average exchange rates.

The table above is for continuing operations only and excludes the £0.8m of adjusted operating profit generated by Senior Hargreaves prior to its sale in October 2012 (2011 full year - £1.0m).  On this basis, divisional revenue grew by 5% to £242.0m (2011 - £230.7m) with the acquisition of GA in November 2012 and the growth in heavy truck and petrochemical markets more than offsetting a marked decline in the demand for passenger vehicles in Europe.  This mix change, combined with operational improvements and favourable raw material pricing, resulted in adjusted operating profit increasing by 12% to £37.3m (2011 - £33.3m).  It is particularly notable that the operating margin for the Division, on a continuing basis, rose to a record level of 15.4% in 2012 (2011 - 14.4%).

Overall, Group sales to truck and off-highway markets increased by 20% whilst Group sales to passenger vehicle markets declined by 13%.  The Flexonics Division's main land vehicle market exposures are to the North American truck market (8% of Group sales in 2012, with Cummins being responsible for the vast majority) and the European passenger vehicle market (6% of Group sales, with the largest customers being PSA, Ford and Renault).  These two markets fared quite differently during 2012: North American medium- and heavy-duty truck sales increased by 14% over 2011, with the first half of 2012 being stronger than the second; whereas European passenger vehicle demand fell by 8%, to reach its lowest level since 1995.  Within this weak market, the Group's three largest European land vehicle customers reported a collective sales decline of 15%.  Elsewhere, passenger vehicle demand was up by over 10% in North America, and slightly ahead in India and Brazil, whereas European truck demand mirrored that of passenger vehicles in falling by 8%.  Against this backdrop the Group's German operation's recent success in winning new programmes meant that its sales to the medium- and heavy-duty truck market actually increased by 5%.

Despite generally weak land vehicle markets, tightening emission legislation, combined with the Group's operational excellence and product development skills, mean market-share opportunities regularly arise.  The Group's operation in the Czech Republic is already benefiting from new programme wins from existing customers, and the French operation, having been awarded work from new customers such as Jaguar Land Rover and Liebherr during 2012, is expected to benefit in the coming years.  2012 also saw good progress being made in North America towards winning a second major customer, in addition to Cummins, for the Group's EGR cooler product.

Largely due to the successful delivery of a very large expansion joint project to China for the petrochemical industry, total divisional industrial market revenue increased by 8% over the prior year.  Outside Europe, where demand was generally weak, most industrial markets remained at satisfactory levels with the Group benefiting in North America from increased demand for its fuel-cell bellows as well as its damper control products, where the benefits of selling on a global basis through the wider Senior sales network are now being seen.  Whilst global industrial project activity continues at encouraging levels, which bodes well for the longer-term future, the short-term nature of the order book means that the 2013 outcome for a number of the Group's industrial businesses remains dependent upon the timing, as well as the size and nature, of the anticipated project awards.

FINANCIAL REVIEW

Financial Summary

A summary of the Group's operating results is set out in the table below.  Further detail on the performance of each Division is set out above.


Revenue


Adjusted
Operating
Profit

(1)

Margin


2012

2011


2012

2011


2012

2011


£m

£m


£m

£m


%

%

Aerospace

470.5

382.6


72.1

59.6


15.3

15.6

Flexonics

242.0

240.1


37.3

35.0


15.4

14.6

Share of results of joint venture

-

-


(0.1)

-


-

-

Inter-segment sales

(0.5)

(0.4)


-

-


-

-

Central costs

-

-


(8.7)

(7.3)


-

-

Continuing operations

712.0

622.3


100.6

87.3


14.1

14.0

Discontinued

17.8

18.4


0.8

1.0


4.5

5.4

Group total

729.8

640.7


101.4

88.3


13.9

13.8

 

(1)

Adjusted operating profit is the profit before interest and tax and before profit or loss on disposal of fixed assets, amortisation of intangible assets arising on acquisitions, acquisition costs, pension curtailment charge and profit on disposal of business.

Adjusted operating profit may be reconciled to the operating profit that is shown in the Consolidated Income Statement as follows:


2012


2011


£m


£m

Operating profit per Financial Statements

93.7


82.0

Profit for the period from discontinued operations

3.3


1.0

Loss on sale of fixed assets

0.1


0.3

Exceptional pension charge

1.9


-

Amortisation of intangible assets from acquisitions

4.3


4.4

Acquisition costs

0.6


0.6

Profit on disposal of business

(2.5)


-

Adjusted operating profit

101.4


88.3

Total Group revenue increased by 14% (£89.1m) in 2012 including the adverse impact of foreign exchange movements (16% revenue increase on a constant currency basis).  This increase included £63.2m from acquisitions: £55.6m related to 11 months' incremental revenue from the acquisition of Weston which had taken place at the end of November 2011; £4.0m being three months' incremental revenue from the acquisition of Damar AeroSystems at the end of March 2011; and £3.6m due to the acquisition of GA in November 2012.  In addition, total Group revenue includes discontinued operations revenue of £17.8m (2011 - £18.4m) from Senior Hargreaves Limited which was sold in October 2012.  Excluding acquisitions and discontinued operations, revenue in the Group's organic operations (at constant currency) increased by 6%.

In aerospace markets, the Group benefited from increasing build rates in the large commercial aircraft sector and an increase in demand from the Group's main programmes in the business jet sector.  Revenue in the military sector increased slightly, in particular on the F-35 Joint Strike Fighter programme, with build rates in the Group's key military platforms remaining satisfactory for the majority of the year, although weakening in the fourth quarter.  Regional jet markets remained subdued, with total revenue largely unchanged in this sector.  Total revenue in land vehicle markets increased overall although activity levels were mixed, with strong increases in North American truck markets, notably in the first half of the year, but a further decline in European passenger vehicle registrations throughout the year.  Passenger vehicle markets in India continued to grow steadily but declined marginally overall in Brazil.  Activity levels in the Group's industrial markets were positive, with increases in demand for large expansion joints experienced in global petrochemical markets and for dampers in US power & energy markets.

The Group's free cash flow and net debt for 2012 and the prior year were:


2012


2011


£m


£m

Free cash flow

57.6


55.6

Net debt

70.9


93.0

Net debt : EBITDA ratio

0.6x


0.8x

Free cash flow is the total net cash flow generated by the Group prior to corporate activity such as acquisitions, disposals, financing and transactions with shareholders; it is calculated as follows:


2012


2011


£m


£m

Net cash from operating activities

83.3


77.1

Interest received

0.3


0.3

Proceeds on disposal of tangible fixed assets

0.1


0.3

Purchases of tangible fixed assets

(25.3)


(21.1)

Purchases of intangible assets

(0.8)


(1.0)

Free cash flow

57.6


55.6

The Group generated significant free cash flow of £57.6m in 2012 (2011 - £55.6m), a strong performance for the year, and marginally ahead of 2011 despite an increase in capital expenditure on future growth programmes in the commercial aerospace and heavy-duty diesel engine sectors.  The principal drivers of the positive underlying cash performance were the increase in operating profits combined with sustained tight controls over working capital levels, ultimately resulting in an excellent level of cash conversion.  The free cash flow performance was after the Group had contributed a further £13.7m in excess of service costs (2011 - £7.8m) into its defined benefit pension plans in the UK and the USA, including a one-off voluntary contribution of £6.0m following the disposal of Senior Hargreaves Limited.

The strong cash flow enabled the Group to fund the GA acquisition from existing cash and debt facilities, for a total initial consideration of £28.1m, and still resulted in a satisfactory decline in net debt of £22.1m during the year (including favourable foreign exchange movements of £4.1m).  Net debt at the year-end was £70.9m (2011 - £93.0m).

Financial Detail

Revenue

Group revenue increased by £89.1m (14%) to £729.8m (2011 - £640.7m), including £17.8m (2011 - £18.4m) from a discontinued operation, Senior Hargreaves, which was sold in October 2012.  Excluding this, total Group revenue from continuing operations increased by £89.7m (14%) including an incremental £63.2m from three acquisitions: GA acquired in November 2012, and the full year effect of the acquisitions of Weston made in November 2011 and Damar AeroSystems in March 2011.  If the effect of acquisitions and a year-on-year adverse exchange impact of £9.6m are excluded, underlying revenue from organic operations increased by 6% on a constant currency basis.  In 2012, 66% of sales from continuing operations originated from North America, 14% from the UK, 13% from the Rest of Europe and 7% from the Rest of the World.

Operating profit

Adjusted operating profit increased by £13.1m (15%) to £101.4m (2011 - £88.3m), due to a combination of the increase in organic operations' revenue, further operational improvements and year-on-year acquisition contributions of £6.4m.  Adjusted operating profit includes £0.8m operating profit from Senior Hargreaves (2011 - £1.0m), but is before finance costs, loss on disposal of fixed assets of £0.1m (2011 - £0.3m), acquisition costs of £0.6m (2011 - £0.6m), amortisation of intangible assets arising on acquisitions of £4.3m (2011 - £4.4m) and an exceptional pension charge of £1.9m relating to the disposal of Senior Hargreaves (2011 - £nil).  The Group suffered adverse foreign currency movements of £1.4m on translation of comparative profits and, if these are excluded together with the incremental profit contribution of £6.4m from acquisitions, underlying adjusted operating profit from organic operations increased by 10% on a constant currency basis.  The Group achieved a record operating margin of 13.9% in 2012 (2011 - 13.8%), with underlying margin improvements in both the Aerospace and Flexonics Divisions.  These were achieved through a combination of the positive impacts of increased volumes in key core markets, in particular the large commercial aircraft market, and further benefits from operational efficiency improvements, in particular in North American truck operations.

Total Group reported operating profit from continuing operations increased by 14% to £93.7m (2011 - £82.0m), after charges for the amortisation of intangible assets from acquisitions, acquisition costs, loss of disposal of fixed assets and an exceptional pension charge as described above.

Finance costs

Total finance costs, net of investment income of £0.3m (2011 - £0.3m), were unchanged at £10.3m (2011 - £10.3m).  Net interest costs on borrowings fell slightly to £7.7m (2011 - £7.9m) mainly due to an increased level of average cash deposits during the year.  The Group has fixed rate, fully-drawn US private placement facilities of $185m (£113.5m) which attract a fixed interest payment each year.  The Group's total net debt was below this level for the whole of 2012 and 2011.  Fluctuations in the Group's net interest costs only therefore arise due to changes in cash amounts on deposit, deposit interest rates and variations in the rate of foreign exchange translation, principally between the Pound Sterling and the US dollar.

Pension-related finance charges increased to £2.6m in 2012 (2011 - £2.4m), principally due to a decrease in the expected rate of return on assets, as an increasing proportion of the Group's pension assets are invested in fixed income securities as part of the continuing implementation of liability-driven investment strategies in the Group's defined benefit pension plans.

Profit before tax

Adjusted profit before tax increased by 17% to £91.1m (2011 - £78.0m).  Reported profit before tax from continuing operations increased by 16% to £83.4m (2011 - £71.7m).  The reconciling items between these two measures are shown in Note 4.

Tax charge

The total tax charge decreased to £16.8m (2011 - £17.7m), despite the increase in the Group's taxable profits.  Net tax benefits of £1.8m (2011 - £1.8m) arose from the loss on sale of fixed assets, acquisition costs, amortisation of intangible assets from acquisitions and the exceptional pension charge in 2012.  If these are added back, the resultant tax charge of £18.6m (2011 - £19.5m) represented an underlying rate of 20.4% (2011 - 25.0%) on the adjusted profit before tax of £91.1m (2011 - £78.0m).  The decrease in the underlying tax rate arose mainly due to a decrease in the tax rate in the USA, a favourable tax ruling in the Czech Republic and an increase in deferred tax assets recognised in the UK arising from the capitalisation of certain historical UK losses that are now anticipated to be available for use following the acquisition of Weston in 2011.

Earnings per share

The weighted average number of shares, for the purposes of calculating undiluted earnings per share, increased to 408.5 million (2011 - 402.0 million).  Adjusted earnings per share increased by 22% to 17.75 pence (2011 - 14.55 pence).  Basic earnings per share increased by 25% to 17.11 pence (2011 - 13.68 pence).  See Note 7 for details of the basis of these calculations.

Dividends

A final dividend of 3.27 pence per share is proposed for 2012 (2011 - 2.65 pence), which would cost £13.5m (2011 final dividend - £10.7m).  This would bring the full-year dividend to 4.65 pence per share, 22% above the prior year.  The cash outflow incurred during 2012 in respect of the final dividend for 2011 and the interim dividend for 2012 was £16.4m (2011 - £13.1m).

Research and development

The Group's expenditure on research and development increased to £12.8m during 2012 (2011 - £11.8m).  Expenditure was incurred mainly on designing and engineering products in accordance with individual customer specifications and developing specific manufacturing processes for their production.

Capital expenditure

Gross capital expenditure increased by 18% in 2012 to £26.1m (2011 - £22.1m), principally representing investment in future growth programmes and necessary replacement and compliance expenditure.  The Group's operations remain well capitalised.  The disposal of assets no longer required raised £0.1m (2011 - £0.3m).  A higher level of capital expenditure is anticipated for 2013, although the extent will be dependent primarily on the level of build rate increases in the large commercial aircraft segment and the Group securing the expected new programme wins in both Divisions.

Capital structure

The Group's Consolidated Balance Sheet at 31 December 2012 may be summarised as follows:


Assets


Liabilities


Net Assets


£m


£m


£m

Property, plant and equipment

134.8


-


134.8

Goodwill and intangible assets

238.8


-


238.8

Investment in joint venture

0.8


-


0.8

Current assets and liabilities

192.4


(140.8)


51.6

Other non-current assets and liabilities

13.0


(18.1)


(5.1)

Retirement benefit obligations

-


(37.1)


(37.1)

Total before net debt

579.8


(196.0)


383.8

Net debt

44.5


(115.4)


(70.9)

Total at 31 December 2012

624.3


(311.4)


312.9

Total at 31 December 2011

589.3


(313.0)


276.3

Net assets increased by 13% in the year to £312.9m (2011 - £276.3m), in the main as a result of retained profits of £69.9m.  Net assets per share increased by 10% to 75.6 pence (2011 - 68.7 pence).  There were 413.9 million ordinary shares in issue at the end of 2012 (2011 - 402.2 million).

Retirement benefit obligations, as calculated in accordance with IAS 19, increased by £2.6m to £37.1m (2011 - £34.5m) principally due to the negative impact of an increase in plan liabilities resulting from a decrease in the discount rate used to discount plan liabilities and a £1.9m curtailment charge in respect of the Senior Hargreaves disposal, partially offset by the positive impact of an increase in the value of fixed income assets in the plans and £13.7m of cash contributions in excess of service costs.

Cash flow

The Group generated significant free cash flow (whose derivation is set out in the table below) of £57.6m in 2012, £2.0m above the £55.6m achieved in 2011.  The main driver of the year's performance was cash generated from operations of £99.8m, which is stated after taking into account additional pension contributions in excess of service costs of £13.7m (2011 - £7.8m), including a one-off voluntary payment of £6.0m following the disposal of Senior Hargreaves, and a working capital outflow of £10.2m (2011 - £4.6m outflow).

The positive cash flow from operations was offset by increased net capital expenditure of £26.0m (2011 - £21.8m) and tax and interest payments of £16.2m (2011 - £18.9m).

 

 


2012


2011


£m


£m

Operating profit from continuing operations

93.7


82.0

Discontinued operations profit before tax

0.8


1.0

Depreciation and amortisation

25.1


23.0

Share of loss in joint venture

0.1


-

Working capital movement

(10.2)


(4.6)

Pension payments above service cost

(7.7)


(7.8)

Additional discretionary pension payments

(6.0)


-

Other items

4.0


2.7

Cash generated from operations

99.8


96.3

Interest paid (net)

(7.6)


(8.2)

Tax paid

(8.6)


(10.7)

Capital expenditure

(26.1)


(22.1)

Sale of fixed assets

0.1


0.3

Free cash flow

57.6


55.6

Dividends

(16.4)


(13.1)

Acquisitions

(28.1)


(68.6)

Investment in joint venture

(0.9)


-

Proceeds on disposal of subsidiary

4.5


-

Share issues

2.3


-

Purchase of shares held by employee benefit trust

(1.0)


-

Finance lease assumed on acquisition and entered into

-


(0.9)

Foreign exchange variations

4.1


(2.3)

Opening net debt

(93.0)


(63.7)

Closing net debt

(70.9)


(93.0)

Net debt

Net debt decreased by £22.1m in the year to £70.9m (2011 - £93.0m).  The main reason for this reduction was the increase in cash generated by operations, which itself was driven by the underlying positive impact of increased profitability and sustained low levels of working capital.  The principal elements of other expenditure that partially offset this increase were expenditure on acquisitions and the Group's new joint venture in China totalling £29.0m (2011 - £68.6m), and gross capital expenditure of £26.1m (2011 - £22.1m).  At the year-end, net debt comprised gross borrowings (including finance leases of £1.0m) of £115.4m, with 99% of the Group's gross borrowings in US dollars (31 December 2011 - 98%), and cash and cash equivalents of £44.5m (31 December 2011 - £29.3m).

The Group's committed borrowing facilities contain a requirement that the ratio of EBITDA (adjusted profit before interest, tax, depreciation and amortisation) to net interest costs must exceed 3.5x, and that the ratio of net debt to EBITDA must not exceed 3.0x.  At 31 December 2012, the Group was operating well within these covenants as the ratio of EBITDA to net interest costs was 15.7x (31 December 2011 - 13.7x) and the ratio of net debt to EBITDA was 0.6x (31 December 2011 - 0.8x).

Liquidity

As at 31 December 2012, the Group's gross borrowings excluding finance leases were £114.4m (2011 - £120.7m).  The maturity of these borrowings, together with the maturity of the Group's committed facilities, can be analysed as follows:


Gross
Borrowings

(1)

Committed
Facilities


£m


£m

Within one year

0.8


-

In the second year

21.6


21.5

In years three to five

33.7


115.5

After five years

58.3


58.3


114.4


195.3

 

(1)

Gross borrowings include the use of bank overdrafts, other loans and committed facilities, but exclude finance leases of £1.0m.

At the year-end, the Group had committed facilities of £195.3m with a weighted average maturity of 4.1 years.  The Group is in a strong funding position, with headroom of £124.4m under these facilities and no borrowings due for repayment until a private placement loan of £21.5m matures in October 2014.

Going concern basis

The Group's business activities, performance and position are set out above in the Financial Review and the Divisional Business Reviews.  These include a description of the financial position of the Group, its cash flows, liquidity position and borrowing facilities.  In addition, a review of the principal risks and uncertainties that are likely to affect the Group's future development is set out below.  A summary of the Group's policies and processes in respect of capital and financial risk management, including foreign exchange and liquidity risks, is included in Note 22 of the Annual Report & Accounts 2012.

The Group meets its day-to-day working capital and other funding requirements through a combination of long-term funding, in the form of revolving credit and private placement facilities, and short-term overdraft borrowing.  At 31 December 2012, 98% of the Group's gross debt was financed via revolving credit and private placement facilities, with an average maturity of 4.1 years.  The Group is profitable, cash generative and well funded with net debt of £70.9m compared to £195.3m of committed borrowing facilities, and has no major borrowing facility renewal before October 2014.

However, economic conditions inevitably vary and so potentially create uncertainty, particularly over the level of demand for the Group's products and the exchange rate between the Pound Sterling and the US dollar.  This exchange rate is important to the Group's financial performance given that around 66% of the Group's profits in 2012 were earned in the USA and 99% of its gross borrowings at 31 December 2012 were denominated in US dollars.  For these reasons, a sensitivity analysis has been performed on the Group's forecasts and projections, to take account of reasonably possible changes in trading performance together with foreign exchange fluctuations under the hedging policies that are in place.  This analysis shows that the Group will be able to operate well within the level of its current committed borrowing facilities and banking covenants under all reasonably foreseeable scenarios.  As a consequence, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, and the Board has continued to adopt the going concern basis in preparing the Group's Annual Report & Accounts 2012.

Changes in accounting policies

The accounting policies adopted in the Financial Statements are consistent with those followed in the preparation of the Group's Annual Report & Accounts 2011, except for the adoption of Standards and Interpretations that are effective for the current financial year.  These are highlighted in Note 2 of the Financial Statements, and do not have a material impact on the presentation of the Group's results.

Related party transactions

The Group's related party transactions are between the Company and its subsidiaries, and have been eliminated on consolidation.

Risks and Uncertainties

Integrated risk management and Group risk philosophy

The Board is ultimately responsible for managing risk, and for the implementation of effective risk management procedures and internal control systems.  Across the Group, these are designed to align with the UK Corporate Governance Code's guidance on Risk Management and Internal Control.  The Audit Committee is responsible for reviewing the effectiveness of the Group's internal control systems that were in operation during the year, and the fulfilment of this responsibility is described in the Audit Committee Report on pages 42 and 43 of the Annual Report and Accounts 2012.

An integrated risk management framework continues to evolve within the Group, aimed at improving the efficiency and effectiveness of the Group's risk management procedures.  This initiative is sponsored by the Board, aligned with industry best practice and is designed to take account of the Group's internal culture.  As a result of this initiative, examples of process areas previously identified for increased focus are strategic planning and objective setting, and the Group's approach to internal audit, business continuity, IT policies, internal controls over financial reporting and risk reporting.  Good progress has been made with the implementation of these process improvements which are becoming embedded in the Group's operations.

Senior's risk philosophy, embodied in a Risk Philosophy Statement which has been rolled out across the Group, is based around an acknowledgement that profits are in part the reward for risk taking, and therefore risk should be embraced and managed effectively within each business unit.  The Group aims to take a relatively conservative approach to risk management, targeting a developmental approach that is evolutionary rather than revolutionary.  Pursuit of opportunities is encouraged, within an effective risk management framework, as an essential component of a high-performance culture.  It is acknowledged that strong risk management procedures are likely to enhance senior leadership decision-making capabilities, strengthen accountability and enhance stewardship of the Group's assets.  In turn this can be expected to result in management teams being able to embrace increased levels of risk and pursue more opportunities, which should also allow the Group to increase its rate of performance delivery without exceeding its risk appetite.

The Group aims to embed its risk management procedures within its existing business processes and corporate governance structure, rather than impose an inefficient administrative burden on its operations.  At a minimum, the Group aims to ensure that any individually significant event that:

i)

has or may result in the potential to compromise its ability to achieve its objectives; or

ii)

could lead to a material breach of policies and procedures; or

iii)

could impact the delivery of earnings materially at a local operational level

is identified, reported on and dealt with through the Group's risk management procedures.

Risk assessment and risk reporting procedures

The Group has a well-established annual process for identifying, evaluating and managing its significant risks.  This process starts in April each year with a risk review and assessment conducted at each of the Group's operations, facilitated by local senior management.  A Principal Risk list is generated from each review, with individual risks assigned to the categories of Strategic, Operational, Compliance or Financial Reporting in nature.  Management is required to record details of controls that are in place to mitigate each risk, make an assessment of the residual likelihood and impact of each risk having a material impact on the operation's ability to achieve its objectives, and to record any improvement measures that are targeted to strengthen the operation's internal control environment around each risk.  The results of these reviews are consolidated at divisional level with an accompanying divisional overlay, and divisional Principal Risk lists are then submitted for review and discussion by the Executive Committee.

Following review by the Executive Committee, a risk questionnaire is compiled and circulated to each Board member, who is required to make an individual assessment of the potential significance of each risk.  Completed questionnaires are subsequently reviewed and discussed at the Group's June Board meeting each year, following which a Group Principal Risk list is compiled and presented for review and discussion by the Board at the July Board meeting.  The final step in the process is an update of all Principal Risk lists, which is performed late in each calendar year by each operation as part of the annual budget-setting process and ultimately presented to the Board at its January meeting.  In between formal updates, the Board monitors progress in the management of individual risks via regular Executive and Divisional reporting procedures and review and discussion of these reports at Board meetings.

Principal Group risks

Overall, the Group's risk profile is largely unchanged in 2012 compared to 2011.  The principal potential risks and uncertainties which could have a material impact on the Group's future performance and ability to deliver on its stated strategic objectives, together with actions that are being taken to mitigate each risk, are set out below.

 

Risk

Management actions to mitigate risk

Strategy


An appropriately formulated, communicated and effectively executed strategy is essential to avoid the risk of inappropriate allocation of resources and failure to deliver on long-term performance goals.

·     Additional focus has been placed on the strategic planning process, to ensure that the Group formulates the most appropriate strategy to capitalise, over time, on the significant breadth of potential growth opportunities in its chosen market sectors.

·     The process now includes more regular strategy sessions at operational, Executive Committee and Board level.

·     The annual Capital Markets day includes presentation of the Group's strategy to enhance further the external communication process.  This presentation is available on the Company's website.

Global cyclical downturn


The potential adverse impact on the Group of significant demand declines in key markets, arising from the consequences of either sovereign debt issues, newly implemented government austerity measures and/or political instability in the Middle East, remains significant.

·     The Group is well positioned in its key aerospace, industrial, and emission-related sectors of land vehicle markets, where increasingly stringent legislation should ensure that long-term demand for the Group's products remains healthy.

·     The Group's financing position improved again in 2012 as cash conversion remained strong, and with no major borrowing facilities expiring before October 2014.

·     Through diversity of its end-market exposures and a robust financing position, the Group remains well placed to be able to withstand potential negative consequences that may arise from a further global cyclical downturn.

Programme participation


Long-term growth in demand, including participation in future development programmes in the Group's major markets, is an essential foundation for future growth.  Failure to secure profitable new programme wins could have a severe impact on Group performance.

·     The Group has developed a portfolio of businesses that are exposed to markets which exhibit fundamental long-term growth characteristics.

·     Customer value is driven through constructive and co-operative relationships with key customers in each market, providing innovative customer solutions and quality products delivered on time and in line with specifications.

·     The Group ensures that its operations are sufficiently well capitalised to be able to bid competitively on new programme opportunities, and maintains close control over operating costs to ensure that operations remain competitive on existing programmes.

·     The Group utilises an internal contract approval process, comprising both financial and non-financial analyses, to ensure that bids are submitted and won at acceptable margin levels.

·     The above are all critical components that ensure continued profitable participation in existing and future development programmes.

Acquisitions


Failure to execute an effective acquisition programme would have a significant impact on the Group's ability to generate long-term value for shareholders.

·     Consistently strong free cash flow generation gives the Group capacity to continue to execute a targeted acquisition programme.

·     The Group has a well-established acquisition framework that includes proven valuation, due diligence and integration processes.

·     Post-acquisition reviews are performed on all acquisitions, comprising a full retrospective review of each deal process, integration effectiveness, operational performance compared to expectation and sharing of lessons learned with the Board and across the senior management team.

New aircraft platform delays


Significant shipset content has been secured on a number of new aircraft platforms currently under development or in initial phases of production.  These include the Boeing 787 Dreamliner, Bombardier's CSeries regional jet and the Airbus A350.  Delays in the launch or ramp up in production of these platforms could have a material adverse impact on the Group's rate of organic growth.

·     The Group monitors programme development and launch timing of new aircraft platforms very closely, utilising internal customer relationships and market intelligence.

·     A cautious approach is taken to both capital investment in new programmes, to minimise the time between installation and utilisation of new capital equipment, and to the projected build rates and associated revenue in financial projections.

·     The growing breadth of Senior's exposure to a comprehensive and diverse range of aerospace and land vehicle platforms, together with its broad exposure in global industrial markets, means that the Group's future organic growth profile is not overly dependent on any individual new aircraft platform.

Employee retention


An inability to attract, develop and retain high-quality individuals in key management positions could severely affect the long-term success of the Group.

·     Capable, empowered and highly engaged individuals are a key asset of the business.  The Group is able to attract experienced senior executives from within the industry, in part attributable to its culture which is described in the Business Model above.

·     The Group sponsors the development and training of key managers, at all levels, through an increasingly comprehensive in-house management development programme.

·     Senior management turnover ratios remain low, a further indication of success in this important area.

Importance of emerging markets


Customers' desire to move manufacture of components to low cost countries could render the Group's operations uncompetitive and have an adverse impact on profitability.  In addition, certain customers require global programme support as they respond to increasing domestic demand in a number of these emerging markets.

·     The Group's strategy of developing a portfolio of high value-added engineering manufacturing companies has meant that over time it has generally evolved away from products where the direct threat of low-cost country manufacture is significant.

·     The Group successfully employs a strategy of retaining commercial and engineering expertise close to customers' locations, principally in North America and Europe.  This enables effective support to be readily given to its customers whilst increasing manufacturing at above-average growth rates in low-cost country locations where it makes sense to do so and with customer agreement.

·     The Group has an increasing presence in emerging markets via its facilities in Mexico, Thailand, Czech Republic, South Africa, Brazil, India and China.  Each of these operations, individually and in combination, has a healthy number of viable opportunities for further expansion either to supply domestic markets or to support customers' increasingly global needs.

Financing and liquidity


The Group could have insufficient financial resources to fund its growth strategy or meet its financial obligations as they fall due.

·     The Group's overall treasury risk management programme focuses on the unpredictability of financial markets, and seeks to minimise potential adverse effects on the Group's financial performance.

·     Compliance with Financial Policies and exposure limits are reviewed by the Group's Treasury Committee on a regular basis.

·     The Group enters into forward foreign exchange contracts to hedge the exchange risk arising on operations' trading activities in foreign currencies and does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

·     The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, and by continuously monitoring forecast and actual cash flows, matching the maturity profiles of financial assets and liabilities and paying close attention to the projected level of headroom under the covenants contained in its committed borrowing facilities.  For further details see Note 22 of the Annual Report and Accounts 2012.

Corporate governance breach


Corporate governance legislation, (such as the UK Bribery Act and the US Foreign Corrupt Practices Act), regulations and guidance (such as the UK Corporate Governance Code and global health and safety regulations) are increasingly complex and onerous.  A serious breach of these rules and regulations could have a significant impact on the Group's reputation, lead to a loss of confidence on the part of investors, customers or other stakeholders and ultimately have a material adverse impact on the Group's enterprise value.

·     The Group has well-established governance policies and procedures in all key areas, including a Group Code of Business Conduct, Health and Safety Charter, anti-bribery procedures and various policies and procedures over the review and reporting of risk management and internal control activities.

·     The Group Finance Director, the Group Company Secretary and the Head of Internal Audit collectively retain principal responsibility for maintaining and reporting on governance changes that may have an impact on the Group.

·     Periodic governance updates are provided to the Board and Executive Committee at appropriate intervals, and to key operational management.  Recent examples of developments in this area include formulation of a Business Continuity Framework, IT Policy Guidelines, and anti-bribery training.

 

 

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

1.

the Financial Statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

2.

the Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By Order of the Board

Mark Rollins

Simon Nicholls

Group Chief Executive

Group Finance Director

22 February 2013

22 February 2013

Consolidated Income Statement

For the year ended 31 December 2012


 

Notes

 

Year ended
2012
£m


Year ended
2011
£m

Continuing operations







Revenue


3


712.0


622.3

Trading profit




93.9


82.3

Loss on sale of fixed assets




(0.1)


(0.3)

Share of joint venture loss




(0.1)


-

Operating profit (1)


3


93.7


82.0

Investment income




0.3


0.3

Finance costs




(10.6)


(10.6)

Profit before tax (2)




83.4


71.7

Tax


5


(16.8)


(17.7)

Profit for the period from continuing operations




66.6


54.0

Discontinued operations







Operating profit


14


0.8


1.0

Profit on disposal


14


2.5


-

Profit for the period from discontinued operations




3.3


1.0

Profit for the period




69.9


55.0

Attributable to:







Equity holders of the parent




69.9


55.0

Earnings per share







From continuing and discontinued operations







Basic (3)


7


17.11p


13.68p

Diluted (4)


7


16.69p


13.21p

From continuing operations







Basic


7


16.30p


13.43p

Diluted


7


15.90p


12.97p

 

(1) Adjusted operating profit


4


101.4


88.3

(2) Adjusted profit before tax


4


91.1


78.0

(3) Adjusted earnings per share


7


17.75p


14.55p

(4) Adjusted and diluted earnings per share


7


17.31p


14.05p

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012


Year ended
2012
£m


Year ended
2011
£m

Profit for the period

69.9


55.0

Other comprehensive income:




Gains / (losses) on cash flow hedges during the period

1.2


(2.3)

Reclassification adjustments for losses included in profit or loss

0.8


0.2

Gains / (losses) on cash flow hedges

2.0


(2.1)

Gains on revaluation of financial instruments

-


0.1

Exchange differences on translation of foreign operations

(11.1)


(1.4)

Actuarial losses on defined benefit pension schemes

(12.3)


(1.8)

Other comprehensive expense

(21.4)


(5.2)

Tax relating to components of other comprehensive income

2.6


8.8

Other comprehensive (expense) / income for the period, net of tax

(18.8)


3.6

Total comprehensive income for the period

51.1


58.6

Attributable to:




Equity holders of the parent

51.1


58.6

Consolidated Balance Sheet

As at 31 December 2012



Notes


Year ended
2012
£m


Year ended
2011
£m

Non-current assets







Goodwill


8


220.1


209.9

Other intangible assets




18.7


16.9

Investment in joint venture


15


0.8


-

Property, plant and equipment


9


134.8


126.4

Deferred tax assets




12.5


9.0

Trade and other receivables




0.5


0.7

Total non-current assets




387.4


362.9

Current assets







Inventories




91.2


90.3

Construction contracts




-


1.0

Trade and other receivables




101.2


105.8

Cash and cash equivalents


11c)


44.5


29.3

Total current assets




236.9


226.4

Total assets




624.3


589.3

Current liabilities







Trade and other payables




122.4


135.1

Current tax liabilities




12.3


9.2

Obligations under finance leases




0.5


0.6

Bank overdrafts and loans




0.8


1.0

Provisions




6.1


5.5

Total current liabilities




142.1


151.4

Non-current liabilities







Bank and other loans


11c)


113.6


119.7

Retirement benefit obligations


12


37.1


34.5

Deferred tax liabilities




17.6


6.0

Obligations under finance leases




0.5


1.0

Others




0.5


0.4

Total non-current liabilities




169.3


161.6

Total liabilities




311.4


313.0

Net assets




312.9


276.3








Equity







Issued share capital


10


41.4


40.2

Share premium account




13.7


12.3

Equity reserve




3.8


2.7

Hedging and translation reserve




(4.6)


4.5

Retained earnings




259.6


216.6

Own shares




(1.0)


-

Equity attributable to equity holders of the parent




312.9


276.3

Total equity




312.9


276.3

Statement of Changes in Equity

For the year ended 31 December 2012                        All equity is attributable to equity holders of the parent


Issued
share
capital

Share
premium
account

Equity
reserve

Hedging
and
translation
reserve

Retained
earnings

Own
shares

Total
equity


£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2011

40.1

12.3

2.2

6.2

165.1

-

225.9

Profit for the year 2011

-

-

-

-

55.0

-

55.0

Losses on cash flow hedges

-

-

-

(2.1)

-

-

(2.1)

Gains on revaluation of financial instruments

-

-

-

0.1

-

-

0.1

Exchange differences on translation of foreign operations

-

-

-

(1.4)

-

-

(1.4)

Actuarial losses on defined benefit pension schemes

-

-

-

-

(1.8)

-

(1.8)

Tax relating to components of other comprehensive income

-

-

-

1.7

7.1

-

8.8

Total comprehensive income for the period

-

-

-

(1.7)

60.3

-

58.6

Issue of share capital

0.1

-

(0.1)

-

-

-

-

Share-based payment charge

-

-

1.5

-

-

-

1.5

Tax relating to share-based payments

-

-

-

-

3.4

-

3.4

Transfer to retained earnings

-

-

(0.9)

-

0.9

-

-

Dividends paid

-

-

-

-

(13.1)

-

(13.1)

Balance at 31 December 2011

40.2

12.3

2.7

4.5

216.6

-

276.3

Profit for the year 2012

-

-

-

-

69.9

-

69.9

Gains on cash flow hedges

-

-

-

2.0

-

-

2.0

Exchange differences on translation of foreign operations

-

-

-

(11.1)

-

-

(11.1)

Actuarial losses on defined benefit pension schemes

-

-

-

-

(12.3)

-

(12.3)

Tax relating to components of other comprehensive income

-

-

-

-

2.6

-

2.6

Total comprehensive income for the period

-

-

-

(9.1)

60.2

-

51.1

Issue of share capital

1.2

1.4

(0.3)

-

-

-

2.3

Share-based payment charge

-

-

2.0

-

-

-

2.0

Tax relating to share-based payments

-

-

-

-

(1.4)

-

(1.4)

Purchase of shares held by employee benefit trust

-

-

-

-

-

(1.0)

(1.0)

Transfer to retained earnings

-

-

(0.6)

-

0.6

-

-

Dividends paid

-

-

-

-

(16.4)

-

(16.4)

Balance at 31 December 2012

41.4

13.7

3.8

(4.6)

259.6

(1.0)

312.9

Cash Flow Statement

For the year ended 31 December 2012

 

Notes

 

Year ended
2012
£m

 

Year ended
2011
£m


11a)


83.3


77.1










0.3


0.3




0.1


0.3




(25.3)


(21.1)




(0.8)


(1.0)


13


(28.1)


-




-


(53.0)




-


(15.6)


14


4.5


-




(0.9)


-




(50.2)


(90.1)










(16.4)


(13.1)




(0.2)


(0.2)




(0.6)


(0.4)




2.3


-




(1.0)


-




-


0.2




(15.9)


(13.5)




17.2


(26.5)

Cash and cash equivalents at beginning of period



28.5


55.9




(1.8)


(0.9)


11c)


43.9


28.5

Notes to the above Financial Statements

For the year ended 31 December 2012

1. General information

These results for the year ended 31 December 2012 are an excerpt from the Annual Report & Accounts 2012 and do not constitute the Group's statutory accounts for 2012 or 2011.  Statutory accounts for 2011 have been delivered to the Registrar of Companies, and those for 2012 will be delivered following the Company's Annual General Meeting.  The Auditor has reported on both those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under Sections 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation.

2. Significant accounting policies

Whilst the financial information included in this Annual Results Release has been prepared in accordance with International Financial Reporting Standards ("IFRS") adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS.  Full Financial Statements that comply with IFRS are included in the Annual Report & Accounts 2012 which is available at www.seniorplc.com, hard copies of which will be distributed on or soon after 8 March 2013.

The accounting policies adopted are consistent with those followed in the preparation of the Group's Annual Report & Accounts 2012 which are unchanged from those adopted in the Group's Annual Report & Accounts 2011, except as described below.

In the current financial year, the Group has adopted IFRS 7 (Amendment) "Disclosures - Transfers of Financial Assets".

IFRS 7 (Amendment) requires enhanced disclosures for transactions involving transfers of financial assets.  This amendment does not currently affect the Group's disclosures on Financial Instruments.

The following amendments to Standards are also effective from the current financial year but currently do not impact the Group's Financial Statements: IFRS 1 (Amendments) "Removal of Fixed Dates for First-Time Adopters" and "Severe Hyperinflation" and IAS 12 (Amendment) "Deferred Tax: Recovery of Underlying Assets".

3. Segment information

The Group reports its segment information as two operating Divisions according to the market segments they serve, Aerospace and Flexonics.  For management purposes, the Aerospace Division is managed as two sub-divisions, Aerostructures and Fluid Systems, in order to enhance management oversight; however, these are aggregated as one reporting segment in accordance with IFRS 8.  The Flexonics Division is managed as a single division.

Segment information for revenue, operating profit and a reconciliation to entity net profit is presented below.


Aerospace

Flexonics

Elimination
/ Central
costs

Total


Aerospace

Flexonics

Elimination
/ Central
costs

Total


Year
ended
2012
£m

Year
ended
2012
£m

Year
ended
2012
£m

Year
ended
2012
£m


Year
ended
2011
£m

Year
ended
2011
£m

Year
ended
2011
£m

Year
ended
2011
£m

Continuing operations










External revenue

470.3

241.7

-

712.0


382.4

239.9

-

622.3

Inter-segment revenue

0.2

0.3

(0.5)

-


0.2

0.2

(0.4)

-

Total revenue

470.5

242.0

(0.5)

712.0


382.6

240.1

(0.4)

622.3

Continuing adjusted trading profit

72.1

37.3

(8.7)

100.7


59.6

35.0

(7.3)

87.3

Share of joint venture loss

-

(0.1)

-

(0.1)


-

-

-

-

Continuing adjusted operating profit

72.1

37.2

(8.7)

100.6


59.6

35.0

(7.3)

87.3

Loss on sale of fixed assets

-

(0.1)

-

(0.1)


-

(0.3)

-

(0.3)

Exceptional pension charge

-

-

(1.9)

(1.9)


-

-

-

-

Amortisation of intangible assets from acquisitions

(4.1)

(0.2)

-

(4.3)


(4.4)

-

-

(4.4)

Acquisition costs

-

(0.6)

-

(0.6)


(0.6)

-

-

(0.6)

Operating profit

68.0

36.3

(10.6)

93.7


54.6

34.7

(7.3)

82.0

Investment income




0.3





0.3

Finance costs




(10.6)





(10.6)

Profit before tax




83.4





71.7

Tax




(16.8)





(17.7)

Profit for the period from continuing operations




66.6





54.0

Discontinued operations










Operating profit




0.8





1.0

Profit on disposal




2.5





-

Profit for the period from discontinued operations




3.3





1.0

Profit after tax and discontinued operations




69.9





55.0











Continuing operations adjusted operating profit




100.6





87.3

Discontinued operations adjusted operating profit




0.8





1.0

Adjusted operating profit (Note 4)




101.4





88.3

Segment information for assets and liabilities is presented below.

Assets

Year ended
2012
£m


Year ended
2011
£m

Aerospace

219.5


221.1

Flexonics

107.4


97.2

Corporate

1.8


1.3

Segment assets for reportable segments

328.7


319.6

Unallocated




Goodwill

220.1


209.9

Intangible customer relationships

16.7


14.9

Cash

44.5


29.3

Deferred and current tax

12.8


9.2

Assets relating to discontinued operations

-


5.8

Others

1.5


0.6

Total assets per balance sheet

624.3


589.3

 

Liabilities

Year ended
2012
£m


Year ended
2011
£m

Aerospace

63.3


73.0

Flexonics

41.8


44.2

Corporate

21.1


18.2

Segment liabilities for reportable segments

126.2


135.4

Unallocated




Debt

114.4


120.7

Finance leases

1.0


1.6

Deferred and current tax

29.9


15.2

Retirement benefit obligations

37.1


34.5

Liabilities relating to discontinued operations

-


3.6

Others

2.8


2.0

Total liabilities per balance sheet

311.4


313.0

4. Adjusted operating profit and adjusted profit before tax

The provision of adjusted operating profit and adjusted profit before tax, derived in accordance with the table below, has been included to identify the performance of operations, from the time of acquisition or until the time of disposal, prior to the impact of gains or losses arising from the sale of fixed assets, amortisation of intangible assets acquired on acquisitions, exceptional pension charges, gains or losses from disposal of operations and acquisition costs.


Year ended
2012
£m


Year ended
2011
£m

Operating profit from continuing operations

93.7


82.0

Operating profit from discontinued operations

0.8


1.0

Operating profit

94.5


83.0

Loss on sale of fixed assets

0.1


0.3

Exceptional pension charge

1.9


-

Amortisation of intangible assets from acquisitions

4.3


4.4

Acquisition costs

0.6


0.6

Adjustments to operating profit

6.9


5.3

Adjusted operating profit

101.4


88.3

Profit before tax from continuing operations

83.4


71.7

Profit before tax from discontinued operations

3.3


1.0

Profit before tax

86.7


72.7

Adjustments to profit as above before tax

6.9


5.3

Profit on disposal of discontinued operations

(2.5)


-

Adjustments to profit before tax

4.4


5.3

Adjusted profit before tax

91.1


78.0

5. Tax charge


Year ended
2012
£m


Year ended
2011
£m

Current tax:




Current year

14.4


14.4

Adjustments in respect of prior periods

0.7


(0.9)


15.1


13.5

Deferred tax:




Current year

3.7


4.7

Adjustments in respect of prior periods

(2.0)


(0.5)


1.7


4.2


16.8


17.7

UK Corporation tax is calculated at an effective rate of 24.5% (2011 - 26.5%) of the estimated assessable profit for the year.  Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

6. Dividends


Year ended
2012
£m


Year ended
2011
£m

Amounts recognised as distributions to equity holders in the period:




Final dividend for the year ended 31 December 2011 of 2.65p (2010 - 2.12p) per share

10.7


8.5

Interim dividend for the year ended 31 December 2012 of 1.38p (2011 - 1.15p) per share

5.7


4.6


16.4


13.1

Proposed final dividend for the year ended 31 December 2012
of 3.27p (2011 - 2.65p) per share

13.5


10.7

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting 2013 and has not been included as a liability in these Financial Statements.
7. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Number of shares

Year ended
2012
Million


Year ended
2011
Million

Weighted average number of ordinary shares for the purposes of basic earnings per share

408.5


402.0

Effect of dilutive potential ordinary shares:




Share options

10.3


14.3

Weighted average number of ordinary shares for the purposes of diluted earnings per share

418.8


416.3

 


Year ended 2012

Year ended 2011

Earnings and earnings per share

Earnings
£m

EPS
pence

Earnings
£m

EPS
pence

Profit for the period from continuing operations

66.6

16.30

54.0

13.43

Profit for the period from discontinued operations

3.3

0.81

1.0

0.25

Profit for the period from continuing and discontinued operations

69.9

17.11

55.0

13.68

Adjust:





Amortisation of intangible assets from acquisitions net of tax of £1.6m (2011 - £1.6m)

2.7

0.66

2.8

0.70

Acquisition costs net of tax of £0.1m (2011 - £nil)

0.5

0.12

0.6

0.15

Loss on sale of fixed assets net of tax of £0.1m (2011 - £0.2m)

-

-

0.1

0.02

Exceptional pension charge

1.9

0.47

-

-

Profit on disposal of discontinued operations

(2.5)

(0.61)

-

-

Adjusted earnings after tax

72.5

17.75

58.5

14.55

Earnings per share





-     basic from continuing operations


16.30p


13.43p

-     basic from continuing and discontinued operations


17.11p


13.68p

-     diluted from continuing operations


15.90p


12.97p

-     diluted from continuing and discontinued operations


16.69p


13.21p

-     adjusted


17.75p


14.55p

-     adjusted and diluted


17.31p


14.05p

The effect of dilutive shares on the earnings for the purposes of diluted earnings per share is £nil (2011 - £nil).

The denominators used for all basic, diluted and adjusted earnings per share are as detailed in the "Number of shares" table above.

The provision of an adjusted earnings per share, derived in accordance with the table above, has been included to identify the performance of operations, from the time of acquisition or until the time of disposal, prior to the impact of the following items:

gains or losses arising from the sale of fixed assets

amortisation of intangible assets acquired on acquisitions

exceptional pension charges

profit on disposal of discontinued operations

acquisition costs

8. Goodwill

Goodwill increased by £10.2m during the year to £220.1m (2011 - £209.9m) due to goodwill arising on the acquisition of GA of £17.7m (see Note 13), an increase of £0.1m relating to the 2011 acquisition of Weston, and exchange translation differences of £7.6m.

9. Property, plant and equipment

During the period, the Group spent £25.3m (2011 - £21.1m) on the acquisition of property, plant and equipment.  The Group also disposed of property, plant and equipment with a carrying value of £0.2m (2011 - £0.6m) for proceeds of £0.1m (2011 - £0.3m).

10. Share capital

Share capital as at 31 December 2012 amounted to £41.4m.  During 2012, the Group issued 8,923,725 shares at an average price of 25.28p per share under share option plans raising £2.3m.  2,679,044 shares were also issued during 2012 under the Senior plc 2005 Long-Term Incentive Plan.

11. Notes to the cash flow statement

a) Reconciliation of operating profit to net cash from operating activities


Year ended
2012
£m


Year ended
2011
£m

Operating profit from continuing operations

93.7


82.0

Operating profit from discontinued operations

0.8


1.0

Operating profit

94.5


83.0

Adjustments for:




Depreciation of property, plant and equipment

20.1


18.0

Amortisation of intangible assets

5.0


5.0

Share options

2.3


2.5

Loss on disposal of property, plant and equipment

0.1


0.3

Pension payments in excess of service cost

(13.7)


(7.8)

Share of joint venture

0.1


-

Exceptional pension charge

1.9


-

Operating cash flows before movements in working capital

110.3


101.0

Increase in inventories

(3.9)


(7.3)

Decrease / (increase) in receivables

2.6


(13.8)

(Decrease) / increase in payables

(8.9)


16.5

Working capital currency movements

(0.3)


(0.1)

Cash generated by operations

99.8


96.3

Income taxes paid

(8.6)


(10.7)

Interest paid

(7.9)


(8.5)

Net cash from operating activities

83.3


77.1

b) Free cash flow

Free cash flow, a non-statutory item, highlights the total net cash generated by the Group prior to corporate activity such as acquisitions, disposals, financing and transactions with shareholders.  It is derived as follows:


Year ended
2012
£m


Year ended
2011
£m

Net cash from operating activities

83.3


77.1

Interest received

0.3


0.3

Proceeds on disposal of property, plant and equipment

0.1


0.3

Purchases of property, plant and equipment - cash

(25.3)


(21.1)

Purchase of intangible assets

(0.8)


(1.0)

Free cash flow

57.6


55.6

c) Analysis of net debt




At
1 Jan 2012
£m

Cash flow
£m

Non-cash
items
£m

Exchange
movement
£m

At
31 Dec
2012
£m

Cash



29.3

17.0

-

(1.8)

44.5

Overdrafts



(0.8)

0.2

-

-

(0.6)

Cash and cash equivalents



28.5

17.2

-

(1.8)

43.9

Debt due within one year



(0.2)

0.2

(0.2)

-

(0.2)

Debt due after one year



(119.7)

-

0.2

5.9

(113.6)

Finance leases



(1.6)

0.6

-

-

(1.0)

Forward contracts



-

-

-

-

-

Total



(93.0)

18.0

-

4.1

(70.9)

 


Year ended
2012
£m


Year ended
2011
£m

Cash and cash equivalents comprise:




Cash

44.5


29.3

Bank overdrafts

(0.6)


(0.8)

Total

43.9


28.5

Cash and cash equivalents (which are presented as a single class of assets on the face of the Balance Sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.  The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

12. Retirement benefit schemes

Defined Benefit Schemes

Aggregate retirement benefit liabilities are £37.1m (2011 - £34.5m).  The primary components of this liability are the Group's UK and US defined benefit pension schemes, with deficits of £23.3m (2011 - £25.3m) and £8.4m (2011 - £4.2m) respectively, and a liability on unfunded schemes of £5.4m (2011 - £5.0m).  These values have been assessed by independent actuaries using current market values and discount rates.  The increase in the liability from £34.5m at 31 December 2011 to £37.1m at 31 December 2012 is largely due to the recognition of an actuarial loss of £12.3m (due mainly to the reduction in discount rate for both the UK and US Defined Benefit funded plans), the net pension finance charge of £2.6m and recognition of £1.9m curtailment charge in respect of the Senior Hargreaves Limited disposal, offset partially by recognition of contributions in excess of service costs of £13.7m.

13. Acquisitions

On 2 November 2012, the Group acquired 100% of the issued share capital of GAMFG Precision LLC and its parent company GAMCO Acquisition Company (collectively "GA").  GA is located in Franklin, Wisconsin, USA and specialises in the machining of precision components for fuel systems, pumps and hydraulic systems primarily for off-road heavy-duty diesel engine applications, but with a growing presence in the aerospace industry.  Its largest customer is Caterpillar Inc., with Sauer Danfoss Inc., Parker Hannifin Corporation and Woodward Inc. also important purchasers of GA product.  GA's components and capabilities are highly complementary to Senior's existing portfolio; largely in the land vehicle emission control segment today but increasingly with its aerospace operations in the future.  The cash consideration was £28.1m and the acquisition was funded by the Group's existing debt facilities.

Set out below is a provisional summary of the net assets acquired:


£m

Recognised amounts of identifiable assets acquired and liabilities assumed:


Identifiable intangible assets

6.3

Property, plant and equipment

10.2

Inventories

1.7

Financial assets, excluding cash and cash equivalents

3.2

Financial liabilities

(2.7)

Deferred tax liability

(4.7)

Net assets acquired

14.0

Goodwill

17.7

Total consideration

31.7



Consideration satisfied by:


Cash paid

28.1

Deferred consideration payable

3.6

Total consideration

31.7

Net cash outflow arising on acquisition:


Cash consideration paid to date

28.1

Net cash outflow arising on acquisition

28.1

The goodwill of £17.7m represents the premium paid in anticipation of future profitability from assets that are not capable of being separately identified and separately recognised such as the assembled workforce as well as the Group's ability to generate significant future value from expanding GA's currently limited aerospace activities through utilisation of the Group's existing relationships and experience in the aerospace industry.  £1.8m of the goodwill is expected to be deductible for tax purposes.

The intangible assets acquired as part of the acquisition relate mainly to customer contracts and relationships, the fair value of which is dependent on estimates of attributable future revenues, profitability and cash flows and are being amortised over 5.2 years.

The financial assets acquired include trade receivables with a fair value of £3.1m and a gross contractual value of £3.1m, all of which is expected to be collectible.

The deferred consideration payable of £3.6m is made up of £3.7m contingent consideration offset by £0.1m reduction for closing working capital.  The contingent consideration arrangement requires further payment by the Group to GA's former owners of 6 times any EBITDA achieved by GA in excess of £4.7m in 2013, up to a maximum undiscounted payment of £63.0m.  The potential undiscounted amount of all future payments that the Group could be required to make under this arrangement is between £nil and £63.0m.  The fair value of the contingent consideration arrangement of £3.7m was estimated based on management's best estimate of GA's 2013 performance at the acquisition date.

Acquisition related costs of £0.3m are included in administrative expenses within trading profit in the Group's Consolidated Income Statement for the year ended 31 December 2012.

The fair value of the acquired identifiable assets and liabilities is provisional pending finalisation of the fair value exercise.

GA contributed £3.6m of external revenue and £0.1m to the Group's operating profit from the date of acquisition to 31 December 2012.  If the acquisition had been completed on 1 January 2012, continuing Group revenue for the 12 months ended 31 December 2012 would have been £743.6m and continuing Group operating profit would have been £96.7m.

14. Discontinued operations

On 16 October 2012, the Group disposed of the entire share capital of Senior Hargreaves Limited to the M&W Group.

The results of the discontinued operation, which have been included in the Consolidated Income Statement, were as follows:


Year ended
2012
£m


Year ended
2011
£m

Revenue

17.8


18.4

Expenses

(17.0)


(17.4)

Operating Profit

0.8


1.0

Profit on disposal

2.5


-

Tax

-


-

Profit for the period from discontinued operations

3.3


1.0

During the year, Senior Hargreaves Limited contributed £nil (2011 - £1.7m) to the Group's net operating cash flows, paid £0.1m (2011 - £0.1m) in respect of investing activities and paid £2.0m (2011 - £1.0m) in respect of financing activities.

The net assets of Senior Hargreaves Limited at the date of disposal were as follows:




£m

Property, plant and equipment



1.5

Inventories



0.8

Debtors



3.5

Creditors



(3.1)

Bank overdraft



(0.7)

Profit on disposal



2.5

Total consideration



4.5

Satisfied by:




Cash and cash equivalents



4.5

15. Investment in joint venture

During the year, the Group set up and has a 49% interest in Senior Flexonics Technologies (Wuhan) Limited, a jointly controlled entity incorporated in China.  The Group's investment of £0.8m represents the Group's share of the joint venture's net assets as at 31 December 2012.

16. Post balance sheet event

On 8 February 2013, the Group acquired 100% of the issued share capital of Atlas Composites Limited and its parent company Castlegate 408 Limited (collectively "Atlas").  Atlas, based in Ilkeston, Derbyshire, UK, designs and manufactures composite structures, components and tooling for aerospace, motor sport, defence and communications markets.  The cash consideration, net of cash acquired of £0.1m, was £2.4m and the acquisition was funded from the Group's existing debt facilities.


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