REG - Senior PLC - Final Results
27/02/2023 07:00
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RNS Number : 0549R Senior PLC 27 February 2023
Senior plc
Results for the year ended 31 December 2022
Strong results as recovery continues
FINANCIAL HIGHLIGHTS Year ended 31 December change change (
(constant
currency)
(4))
2022 2021
REVENUE £848.4m £658.7m +29% +20%
OPERATING PROFIT £32.5m £10.5m +210% +164%
ADJUSTED FOR:
NET RESTRUCTURING INCOME £(4.2)m £(4.4)m
AMORTISATION OF INTANGIBLE ASSETS FROM ACQUISITIONS £0.2m £nil
ADJUSTED OPERATING PROFIT ((1)) £28.5m £6.1m +367% +285%
ADJUSTED OPERATING MARGIN ((1)) 3.4% 0.9% +250 bps +240 bps
PROFIT BEFORE TAX £22.4m £23.7m -5% -18%
ADJUSTED PROFIT/(LOSS) BEFORE TAX ((1)) £20.1m £(1.9)m +1,158% +1,775%
BASIC EARNINGS PER SHARE 4.86p 5.82p -16%
ADJUSTED EARNINGS PER SHARE ((1)) 4.36p 0.17p +2,465%
TOTAL DIVIDEND (PAID AND PROPOSED) PER SHARE 1.30p Nil p
FREE CASH FLOW ((2)) £27.7m £14.0m +98%
NET DEBT EXCLUDING CAPITALISED LEASES ((2)) £100.5m £79.9m £20.6m
increase
NET DEBT / EBITDA((5)) 1.47x 1.87x
NET DEBT ((2)) £178.9m £153.1m £25.8m
increase
ROCE ((3)) 4.7% 1.0% +370 bps
Highlights
● Strong trading performance compared to prior year with significantly improved
profitability
● Healthy book-to-bill of 1.24
● Excellent free cash flow of £27.7m, double prior year
● Acquired Spencer Aerospace with initial cash outlay of $30m
● Healthy balance sheet, with net debt / EBITDA((5)) of 1.47x (prior year 1.87x)
● Achieved class "A" rating for our climate disclosure from CDP
● Another year of strong recovery and growth anticipated for 2023
● Final dividend of 1.00p proposed, reflecting improved performance
Commenting on the results, David Squires, Group Chief Executive Officer of
Senior plc, said:
"We have delivered a strong set of results for 2022, overcoming what was a
difficult macroeconomic environment. We significantly improved
profitability, generated excellent free cashflow, strengthened our balance
sheet and continued to make very good progress on our sustainability goals,
maintaining our sector leading position.
As we start 2023, our order book is healthy, reflecting favourable market
dynamics, with commercial aerospace recovery in full swing with other
important markets remaining buoyant. Demand is currently holding up well,
though we remain mindful of the potential impact of the ongoing supply chain
pressures in aerospace, as well as the broader macro-economic situation and
geopolitical uncertainty.
With aircraft build rates increasing through the year, and the continuing
aerospace supply chain challenges, we anticipate trading in our Aerospace
Division to be more weighted to the second half of the year. Overall, the
Board anticipates strong growth for the Group in 2023 in line with its
expectations.
We remain on track to drive the Group ROCE to a minimum of 13.5% in line with
our previously stated ambition.
Our strategy and positioning in attractive and structurally resilient core
markets, combined with our sector leading sustainability credentials and
highly relevant technical capabilities, is delivering a strong recovery across
our Aerospace and Flexonics Divisions and enhanced value for our
stakeholders."
Further information
Bindi Foyle, Group Finance Director, Senior plc +44 (0) 1923 714 725
Gulshen Patel, Director of Investor Relations & Corporate Communications, +44 (0) 1923 714 722
Senior plc
Richard Webster-Smith, FGS Global +44 (0) 7796 708 551
Notes
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 2022, together with other information on Senior plc, can be
found at: www.seniorplc.com (http://www.seniorplc.com)
The information contained in this Release is an extract from the Annual Report
& Accounts 2022, however, some references to Notes and page numbers have
been amended to reflect Notes 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 2022. Therefore, certain Notes and parts of the
Directors' Report reported on are not included within this Release.
(1) Adjusted operating profit and adjusted profit/loss before tax are stated
before £4.2m net restructuring income (2021 - £4.4m, see Note for further
detail) and £0.2m amortisation of intangible assets from acquisitions (2021 -
£nil). Adjusted profit/loss before tax is also stated before costs
associated with corporate undertakings of £1.7m (2021 - £21.2m income, see
Note 4 for further detail). Adjusted operating margin is the ratio of
adjusted operating profit to revenue. In 2021, Adjusted earnings per share
is also stated before exceptional non-cash tax credit of £0.6m.
(2) See Note 12b and 12c for derivation of free cash flow and of net debt,
respectively.
(3) Return on capital employed ("ROCE") is derived from annual adjusted operating
profit (as defined in Note 4) divided by the average of the capital employed
at the start and end of that twelve-month period, capital employed being total
equity plus net debt (as derived in Note 12c).
(4) 2021 results translated using 2022 average exchange rates - constant currency.
(5) The following measures are used for the purpose of assessing covenant
compliance for the Group's borrowing facilities:
● EBITDA is adjusted profit/loss before tax (defined in Note 4) before interest
(defined below), depreciation, amortisation and profit or loss on sale of
property, plant and equipment. It also excludes EBITDA from businesses which
have been disposed and includes 12 months EBITDA for businesses acquired and
it is based on frozen GAAP (pre-IFRS 16). EBITDA for 2022 was £66.8m (2021
- £42.1m).
● Net debt is defined in Note 12c. It is based on frozen GAAP (pre-IFRS 16)
and as required by the covenant definition, it is restated using 12-month
average exchange rates.
● Interest is adjusted finance costs and investment income before net finance
income of retirement benefits. It also excludes interest from businesses
which have been disposed and it is based on frozen GAAP (pre-IFRS 16).
The Group's principal exchange rate for the US Dollar applied in the
translation of Income Statement and cash flow items at average 2022 rates was
$1.24 (2021 - $1.38) and applied in the translation of balance sheet items at
31 December 2022 was $1.21 (31 December 2021 - $1.35).
The Group's principal exchange rate for the US Dollar applied in the
translation of Income Statement and cash flow items at average 2022 rates was
$1.24 (2021 - $1.38) and applied in the translation of balance sheet items at
31 December 2022 was $1.21 (31 December 2021 - $1.35).
Annual Report
The full Annual Report & Accounts 2022 is now available online at
www.seniorplc.com (http://www.seniorplc.com) . Printed copies will be
distributed on or soon after 10 March 2023.
Webcast
There will be a presentation on Monday 27 February 2023 at 11.00am GMT
accessible via a live webcast on Senior's website at
www.seniorplc.com/investors (http://www.seniorplc.com/investors) . The
webcast will be made available on the website for subsequent viewing.
Note to Editors
Senior is a FTSE 250 international manufacturing Group with operations in 12
countries. It is listed on the main market of the London Stock Exchange
(symbol SNR). Senior's Purpose is "we help engineer the transition to a
sustainable world for the benefit of all our stakeholders." Senior designs
and manufactures high technology components and systems for the principal
original equipment producers in the worldwide aerospace & defence, land
vehicle and power & energy markets.
Cautionary Statement
This 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, including both economic and business risk factors,
underlying any such forward-looking information.
GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview of 2022 results
Senior has continued to make good strategic, operational, and financial
progress, with strong delivery across the Group reflected in significantly
improved profitability, excellent free cash flow generation and further
strengthening of our balance sheet.
With commercial aerospace markets recovering and other important end markets
remaining buoyant, we saw order intake increase and a book to bill ratio of
1.24 for the Group, which underpins our confidence in continued growth in 2023
and beyond. Both divisions recorded good order intake demonstrating the
broad, diversified, and high-quality nature of our business.
Senior's Purpose is "we help engineer the transition to a sustainable world
for the benefit of all our stakeholders." Our strategic focus and
industry-leading expertise in fluid conveyance and thermal management
technology was enhanced by the acquisition of Spencer Aerospace in November
2022. Additionally, we made good progress on our technology roadmap with
many new products in development and significant technology and engineering
milestones achieved: for example, the development of the bleed air system for
the supersonic X-59 flight demonstrator utilising our advanced additive
manufacturing capability.((1))
In our Post-close Trading Update on 24 January 2023, we reported a strong end
to the year with outperformance in the Flexonics Division and the Aerospace
Division performing in line with expectations. During 2022, Group revenue
increased 20% on a constant currency basis to £848.4m, with growth in both
divisions. The year-on-year increase reflected the ongoing recovery in our
core markets as well as recent programme wins entering series production.
The Group benefited from the increase in civil aircraft production rates,
growth in land vehicle, power & energy, semi-conductor equipment and space
markets, as well as price increases of £28.6m to offset inflationary costs.
Additionally, favourable exchange rates added £46.3m (9%) to total sales.
In Aerospace, revenue increased 18% year-on-year on a constant currency basis.
Excluding Senior Aerospace Connecticut, which was divested in April 2021,
revenue for the full year on a constant currency basis increased by 20%. The
year-on-year increase reflected the ramp up in civil aircraft production
rates, growth from semi-conductor equipment markets and higher volumes for
space programmes. This more than offset the decline in defence, which was
affected by the delay in spending as a consequence of the Continuing
Resolution being in place in the USA during the first half of the year.
In Flexonics, revenue grew 26% compared to prior year, on a constant currency
basis. The performance in 2022 was driven by strong customer demand in the
land vehicle and power & energy markets. In land vehicles, Senior
outgrew end market demand due to recent contract wins entering series
production. In power & energy markets, activity increased in upstream
oil and gas and levels of maintenance and overhaul activity improved.
We measure Group performance on an adjusted basis, which excludes items that
do not directly reflect the underlying in-year trading performance (see Note
4). References below therefore focus on these adjusted measures.
The Group generated an adjusted operating profit of £28.5m (2021 - £6.1m),
an increase of 367% over the prior year. This resulted in the Group's
adjusted operating margin increasing by 250 basis points, to 3.4% in 2022
(2021 - 0.9%). Overall, in 2022, price increases of £28.6m offset material
and other inflationary cost increases of £26.0m. The improved profitability
principally reflected the volume related operating leverage across our
businesses. Supply chain constraints and inflationary pressures persisted
throughout 2022: our operating businesses worked diligently and proactively to
navigate these challenges, mitigate their impact on the business and ensure
service levels for customers were maintained to the best extent possible. As
we enter 2023, supply chain constraints have eased somewhat in our Flexonics
Division but continue to require relentless management in a number of our
Aerospace businesses. We see that continuing to be the situation for some
time, given the welcome increase in civil aircraft production rates required
by the industry to satisfy the strong demand from airlines and aircraft
lessors. We continue to work closely with our suppliers and customers to
minimise any potential disruption. Very recently, the situation has been
compounded by a fire at one of our key suppliers in Thailand. We are working
closely with the supplier and our customers to assess and mitigate the
specific impact of the fire.
Adjusted profit before tax increased to £20.1m (2021 - £(1.9)m loss). The
adjusted tax charge was £2.0m (2021 - £2.6m credit). Adjusted earnings per
share increased to 4.36 pence (2021 - 0.17 pence).
Reported profit before tax was £22.4m. The 2021 reported profit before tax
was £23.7m, having benefited from the profit on the sale of our Senior
Aerospace Connecticut business during that period. Basic earnings per share
was 4.86 pence (2021 - 5.82 pence).
((1)) This is discussed further in the Technology section of the 2022 Annual Report
and Accounts on page 48.
The Group delivered an excellent cash performance in 2022 generating free cash
inflow of £27.7m (2021 - £14.0m), an increase of 98% over the prior year,
driven by the significant increase in profits. Gross investment in capital
expenditure was £30.5m (2021 - £21.3m), which was 0.8 times depreciation
excluding the impact of IFRS 16 (2021 - 0.6 times). Cash outflows from working
capital were £12.1m (2021 - £2.6m) reflecting increased activity levels and
the need to hold some tactical buffer stocks. However, our effective
management of working capital helped to deliver a small decrease as a
percentage of sales to 15.5% (2021 - 15.6%). The Group had net cash outflow
of £2.6m (2021 - £57.7m inflow) in 2022, due to free cash inflow of £27.7m
(2021 - £14.0m), offset by £30.3m cash outflows related to corporate
undertakings and restructuring activity, interim dividend payments and
purchase of own shares (2021 - £43.7m inflows).
Net debt at the end of December 2022 was £178.9m (including capitalised
leases of £78.4m), an increase of £25.8m from December 2021, after taking
into account £25.3m consideration for the acquisition of Spencer Aerospace,
adverse currency movements of £14.2m and a £9.0m increase for lease
movements. The Group's financial position remains robust, with a healthy
balance sheet and period end net debt to EBITDA of 1.47x (December 2021 -
1.87x).
Return on capital employed ("ROCE") increased by 370 basis points to 4.7%
(2021 - 1.0%). The increase in ROCE reflected the significant increase in
profitability, while managing the increase in capital employed which was
mainly due to the acquisition of Spencer Aerospace. This improvement in ROCE
is an important step to delivering our Group ROCE target of 13.5% over the
medium term.
In line with the Board's decision from earlier in the year to reinstate
dividends, and reflecting confidence in the Group's performance, financial
position and future prospects, the Board is proposing a final dividend of 1.00
pence per share (2021 - nil pence) and this will be paid on 26 May 2023 to
shareholders on the register at close of business on 28 April 2023. This
would bring total dividends, paid and proposed for 2022 to 1.30 pence per
share. We will continue to follow a progressive dividend policy reflecting
earnings per share, free cash flow generation, market conditions and dividend
cover over the medium term.
Market Overview
Our core markets across the Group proved resilient in 2022 and are buoyant as
we commence 2023 despite ongoing macro-economic challenges and geopolitical
uncertainty.
Civil Aerospace (40% of Group)
The rebound in flight departure levels in 2022 was testament to the resilience
of global air travel demand, with the subsequent recovery across commercial
aerospace now in full swing. The strong growth in passenger numbers seen in
most domestic markets and other short-haul routes was sustained throughout
2022 and is expected to continue. International, long-haul traffic has been
accelerating, particularly between North America and Europe and the recent
easing of travel restrictions in China has immediately provided added
momentum. IATA continues to expect domestic passenger numbers to reach 2019
levels by 2024 and international passenger numbers to return to 2019 levels by
2025.
Production volumes for civil aerospace accelerated in 2022, driven by
increased single aisle build rates. Both Boeing and Airbus announced
production rate increases for wide-bodies starting from the end of 2022 and
further increases on single-aisle rates in 2023 and beyond.
In the medium and longer term, structural growth in air travel of c. 4% per
annum is expected to be driven by growing air traffic demand in Asia and
supported by the replacement of older aircraft with latest generation, more
fuel-efficient models. IATA anticipates that Asia Pacific will be the
fastest growing region over the next two decades, buoyed by favourable income
growth and demographic factors.
With our diversified product portfolio in the aerospace sector, including
attractive positions across the newest generation of single aisle aircraft
platforms, Senior is well positioned to benefit from the ongoing market
recovery, and increased aircraft build rates.
Defence (14% of Group)
Senior's sales to the Defence sector are primarily focused on the US defence
market. The approved budget for US defence in Fiscal Year 2022 was $778bn.
However, the 2022 Appropriations Bill was not passed until March 2022 which
meant that up to that point, spending was restricted to 2021's levels under a
Continuing Resolution which led to a delay in some ordering activity. For
Fiscal Year 2023, the National Defense Authorisation Act has approved $858bn
of spend, 10% higher than the budget in 2022.
Senior is well placed with good content on the F-35 Joint Strike Fighter,
mature programmes such as the C-130 transport aircraft, and newer programmes
such as the T-7A Red Hawk trainer.
Other Aerospace (11% of Group)
Sales from our Aerospace operating businesses into end markets outside of the
civil aerospace and defence markets are classified under "Other Aerospace" and
include sales into the space, semi-conductor equipment and medical markets.
Using our world class bellows technology, we manufacture highly engineered
proprietary products to provide unique solutions for semi-conductor
manufacturing equipment.
The semi-conductor equipment market reached a new sales record in 2022,
growing by an estimated 4%, reflecting the increase in global demand for
microchips. While wafer fab, foundry and logic equipment sales increased,
memory and storage demand weakened as post-pandemic related consumer and
work-from-home trends normalise and inflation rises. According to the World
Semiconductor Trade Statistics ("WSTS"), the global semi-conductor market is
forecast to contract by 4% in 2023 as a result of challenging macroeconomic
conditions leading to weaker end market demand.
The galactic low earth orbit satellites market revenue is expected to
accelerate at a compound annual growth rate of 15% between 2022 and 2030.
Rising demand for high-speed and low-cost broadband, growing advancements in
satellite network and potential uses for laser-based space optical
communications are key factors driving revenue growth of the market.
Land Vehicle (19% of Group)
The land vehicle market experienced good momentum in 2022. All segments grew
in 2022, as markets in North America and Europe were buoyant, aided by signs
of supply chain constraints easing compared to prior year.
According to Americas Commercial Transportation ("ACT") research, the
heavy-duty truck market grew by 19% in 2022 compared to 2021. The market is
expected to decline by 3% in 2023 as pent-up demand for more fuel efficient
engines and modest pre-buy activity ahead of tighter emission standards coming
to be introduced in 2024 are expected to be offset by slowing macroeconomic
indicators in the US. According to IHS Markit Inc. ("IHS"), European truck
and bus market production declined by 1% and is forecast to decline by a
further 1% in 2023.
Light vehicle production in 2022 continued to be impacted by semi-conductor
shortages, although this is showing signs of improvement. Production rates
were further impacted by interruptions in the supply of wire harnesses due to
the Ukraine crisis. According to IHS, European light vehicle production grew
by 5% in 2022 compared to 2021, despite being forecasted to decline. It is
forecast to grow by 6% in 2023 as semiconductor availability improves.
According to the International Energy Agency ("IEA"), global electric car
sales have continued their strong growth in 2022. The Bloomberg NEF Electric
Vehicle Outlook 2022 report predicts that by 2025, plug-in vehicles will
represent 23% of new passenger vehicle sales globally and electric vehicles
will represent 6% of the fleet. With the increasing adoption of
electrification for both land vehicle and stationary power applications
continuing, this market is fast growing and represents a major opportunity for
Senior in the medium and long term, particularly for our proprietary battery
cooling technology.
Power & Energy (16% of Group)
Power & energy markets grew in 2022, and in particular, activity in
upstream oil and gas increased and the levels of maintenance and overhaul
improved.
The Ukraine crisis brought pressure to energy supply in key markets, adding
political impetus to build energy security and to accelerate the energy
transition to renewables.
Electricity demand is forecast to continue growing steadily and the IEA
predicts an even stronger push for renewables in the power sector and faster
electrification of industrial processes and heating. In 2022, 30% of global
electricity generation came from renewable sources and the IEA predicts this
rising to about 50% by 2030 and 80% by 2050.
According to the IEA, in 2022, world oil demand grew 2% and is expected to
surpass pre-pandemic levels in 2023 and subsequently grow 1% per year until
2030. Global refining capacity expanded slightly in 2022 with similar growth
anticipated in 2023, although shortages in individual products may well
persist due to uneven rates of demand growth and limits in the refining
system. This tight supply, coupled with a limited appetite for new US
refining capacity due to the US federal government's policies on energy, has
led businesses to focus on upgrading and expanding existing facilities,
thereby increasing maintenance and overhaul work.
Amid soaring fuel prices and growing energy security concerns, momentum is
building for nuclear power in many countries. According to the IEA, nuclear
power generation has the potential to play a significant role in helping
countries to securely transition to energy systems dominated by renewables.
In their global pathway to reach Net Zero Emissions by 2050, the IEA
predicts that nuclear power generation will double between 2020 and 2050, with
construction of new plants needed in all countries that are open to the
technology. Whilst extending lifetimes of nuclear plants will be an
indispensable part of a cost-effective path to Net Zero by 2050, it is
feasible that half of the emission reductions by 2050 may come from small
modular reactors (SMRs) due to their lower cost, smaller size, and reduced
project risks.
We are ensuring we are appropriately resourced to take advantage of the
market-led opportunities across our Flexonics and Aerospace Divisions.
Delivery of Group Strategy
Senior has a compelling strategy to maximise value for shareholders.
Our renewed Purpose is "we help engineer the transition to a sustainable world
for the benefit of all our stakeholders". We do this by:
● Using our technology expertise in fluid conveyance and thermal management to
provide safe and innovative products for demanding applications in some of the
most hostile environments.
● Enabling our customers, who operate in the hardest-to-decarbonise sectors, to
transition to low carbon and clean energy solutions.
● Staying at the forefront of climate disclosure and action by ensuring our own
operations achieve our Net Zero commitments.
Complementing this, our vision is to be a trusted and collaborative high
value-added engineering and manufacturing company producing sustainable growth
in operating profit, cash flow and shareholder value.
To achieve our strategy, we will:
● strengthen our strategic focus on IP-rich fluid conveyance and thermal
management products;
● organically grow the Aerostructures business by fully utilising our world
class global footprint;
● maintain a strong focus on lean manufacturing and operational efficiency
through our Senior Operating System;
● execute on our portfolio optimisation strategy to maximise value creation;
● maintain our sector leading sustainability performance; and
● drive intrinsic strong cash generation and deliver a minimum of 13.5% ROCE
over the medium term.
Our strategic focus and expertise in fluid conveyance and thermal management
technology and capabilities is supported by extensive design and manufacturing
process intellectual property and know-how. We develop and supply
proprietary products, sub-systems and systems for our customers' demanding
applications across a range of diverse and attractive end markets. Our
products are key enablers of pivotal technologies which are delivering
emissions reduction and environmental efficiency and are highly relevant as
the world transitions towards a low carbon economy. Senior has developed
novel solutions for low and zero carbon applications and we are involved in a
range of research and development projects that support the drive for
electrification and hydrogen propulsion systems on land and in the air. This
is discussed further in the "Technology and product design and development"
section below.
As well as our businesses being actively focused on new product offerings for
the transition to a low-carbon world, we continue to be actively involved in
making conventional technology cleaner to bridge the gap between both
worlds. In addition, Senior's end-markets are evolving to reflect the global
effort to achieve net zero carbon emissions. Senior's technology and product
roadmap is aligned to these trends with a product development strategy that is
compatible with our focus on sustainability.
This well-defined strategy, along with our well-capitalised businesses,
provides a solid foundation to support our future growth aspirations.
In June 2022, we announced the strategic acquisition of substantially all of
the assets of Spencer Aerospace Manufacturing, LLC ("Spencer Aerospace"),
which completed in November. The acquisition marks a further step in our
well-defined strategy and is part of our wider objective of optimising our
portfolio and maximising value for shareholders. The acquisition enhances
Senior's industry-leading fluid conveyance capabilities, expanding our
capability to produce higher level assemblies and sub-systems and with the
potential to penetrate new markets such as hydrogen fittings for power and
infrastructure applications. While Senior has existing hydraulic fluid
fittings expertise, our customers have been strongly encouraging us to
increase our presence and, following the acquisition, our combined expertise
and market reach will allow us to respond decisively and accelerate growth as
we leverage Senior's strong relationships with OEMs, Tier 1 integrators, and
aftermarket customers around the world to open new opportunities for Spencer
Aerospace.
The strategy for Aerostructures as its core markets continue to recover is to
focus and drive:
● filling our existing capacity;
● pursuing some further diversification into Space and Defence; and
● growing market share profitably in Civil Aerospace.
We saw good progress in our Aerostructures businesses in 2022 and remain
confident of further performance improvement as production volumes continue to
ramp.
Considered and effective capital deployment
We understand the importance of considered and effective capital deployment
towards maximising shareholder value creation. The Group has a financial
objective to maintain an overall ROCE in excess of the Group's cost of capital
and to target a minimum pre-tax return on capital employed of 13.5% on a post
IFRS 16 basis. Our strategy of expanding Senior's high-quality fluid
conveyance and thermal management businesses remains a priority. All
significant investments are supported by a business case and are assessed
using a rigorous investment appraisal process.
To maximise the Group's operating efficiency and overall effectiveness we
actively review our overall portfolio of operating businesses and evaluate
them in terms of their strategic fit within the Group. In December 2019,
Senior confirmed that it was reviewing strategic options for its
Aerostructures business, which included a potential divestment. Although we
received strong interest for the business, the Group determined that, with the
onset of the pandemic, it was in the best interests of Senior and its
stakeholders for the Aerostructures business to remain within the Group at
that time. We are considering the best time to relaunch the process to
ensure we optimise value for shareholders, taking into account financing
markets and end market conditions.
Technology and product design and development on the road to Net Zero
Senior's fluid conveyance and thermal management businesses have design IP
(intellectual property) and our structures businesses have manufacturing IP
and know-how. Both are underpinned by our investment in advanced
manufacturing technology and supported by our extensive design and engineering
expertise, and collaboration through our Technology Council.
In support of our core technology themes, Senior has identified two key
enabling technologies that underpin innovation throughout our product
development and manufacturing lifecycle: Additive Manufacturing and
Digitisation. Our Technology Council ensures that these technologies are
collaboratively developed for the benefit of all business in the Group.
Electrification and hydrogen power are poised to remain the key technology
themes in many of our end markets in the decades to come. Our fluid
conveyance and thermal management technology, highly relevant to these themes,
will continue to help us support our customers with high-valued solutions in
the medium- and long-term to bridge the transition to sustainable technologies
for the future in a low carbon economy.
Aerospace
● Our traditional fluid conveyance products are entirely compatible with
sustainable aviation fuels, the increasing adoption of which appears to be the
fastest route to lowering aviation emissions.
● Our Additive Manufacturing capabilities are enabling advances in complex
product design for improved performance and weight reduction for the benefit
of our customers across a number of product applications.
● Our world-class capability in thermal management and fluid conveyance provides
opportunities to support the further development of electric/hybrid air
vehicle applications.
● We are building upon our long experience of providing hydrogen fluid handling
and distribution products for industrial markets to support development of
both on-aircraft and off-aircraft hydrogen technologies as this alternative
propulsion ecosystem evolves.
Land Vehicles
● Our current exhaust gas recirculation and waste heat recovery products
continue to support evolving Land Vehicle propulsion systems as they become
more efficient and lower their environmental impact.
● We are focusing on new product offerings for the transition to a low carbon
economy and engage with our customers' new product development programmes by
providing design and engineering support for cooling and fluid handling
solutions for batteries and power electronics on the growing number of
electric/ hybrid vehicles.
● We are supporting the development of fuel cell cooling and associated fluid
conveyance for commercial vehicle applications by capitalising on our
experience of producing hydrogen fuel cell products in the energy sector.
Power & Energy
● We continue to develop our well-established wide range of fluid conveyance
products, bellows and expansion joints for harsh environments in carbon-free
energy generation including solar farms, wind power plants, hydroelectric,
geothermal, fuel cell and nuclear power applications.
● Our extensive experience of providing fluid conveyance products for demanding
environments, and specifically hydrogen fuel cell cooling and conveyance,
opens up opportunities in hydrogen production and infrastructure applications.
Sustainability
A commitment to sustainability is rooted in our core values and underpins our
Purpose. Sustainability is an integral part of our strategy, embedded within
the behaviours of our people and the culture of Senior. We believe with
conviction that how you do business is every bit as important as what you do.
Across the Group we always put safety and ethics first, and we strongly
encourage and promote diversity and inclusivity across our international
operations.
We continuously aim to deliver our products in a manner that is both
environmentally sustainable and supports economic growth and long-term value
creation for shareholders through sustainable methods. In implementing our
strategy, we are committed to using natural resources responsibly, investing
for the long-term wellbeing of the planet and ensuring that all people
involved in our business process' are treated fairly. Our Environmental,
Social and Governance ("ESG") programmes continue to evolve; this year we have
been awarded a class leading "A" rating by CDP for our work on climate
disclosure and action, having already previously achieved the highest
leadership rating for our Supplier Engagement programme. We were also highly
commended by the UK Investor Relations Society in their annual best practice
awards for how we communicate our sustainability programmes and commitments to
our stakeholders.
Our engineering expertise is key in helping to tackle the climate change and
clean air challenge as the world transitions to a lower carbon economy. We
achieve this by applying our expertise and technology across many different
applications in hard-to-decarbonise sectors ranging from aviation through to
land vehicle and power & energy markets. We work in close partnership
with our customers' developing solutions which support both their commercial
and sustainability objectives as we all strive to achieve our individual Net
Zero goals.
In 2022, we have again made good progress with our key sustainability metrics
and activities:
Environment
● Awarded the top 'A' score by CDP in its global annual ranking for transparency
on climate change; Senior is one of only 283 companies which achieved an A out
of nearly 15,000 scored, putting us in the top 2% of disclosing companies.
We were the only Aerospace and Defence company to achieve an A rating in
2022. In February 2022, we were informed by CDP that Senior was awarded the
highest leadership status in its annual supplier engagement ratings, putting
us in the top 8% of companies on this metric.
● We remain on track to achieve our Scope 1, 2 and 3 Science Based Target
Initiative ("SBTi") verified Near Term Targets.
● We have submitted our Long-Term Net Zero Targets to SBTi for validation. The
targets, to be achieved by 2040, are aligned to keep global warming to 1.5
degrees centigrade, the most ambitious goal of the Paris Agreement.
● 41% of our electricity was sourced from renewable energy, an increase from 36%
in 2021.
● Recycled 94.8% of waste produced.
Social
● Recognising the impact of high rates of inflation, Senior has taken steps to
help the broader workforce including salary settlements that reflected
regional cost of living pressures, a more flexible approach to working hours
and promoting employee assistance and wellbeing initiatives.
● Building on the success of our first Global Employee Opinion Survey in 2021
and the actions taken as a result of the feedback, we undertook our second
Global Employee Opinion Survey in September 2022.
● We remain on track to achieve our 2025 Lost Time Injury Rate reduction target.
● In 2022, we introduced additional safety initiatives involving ergonomics and
hand protection to support our 2025 Lost Time Injury Rate reduction goal.
● Currently, 55% of the Board Directors are female and two of the Directors are
from ethnic minority backgrounds.
Governance
● In 2022, employees received refresher training on Senior's Code of Conduct.
● Employees continue to receive training and regular reminders about the risks
related to information/cyber security.
● In 2022, we developed our Climate Change training to improve awareness of
climate related matters across the Group.
Outlook
As we start 2023, our order book is healthy, reflecting favourable market
dynamics, with commercial aerospace recovery in full swing and other important
markets remaining buoyant. Demand is currently holding up well, though we
remain mindful of the potential impact of the ongoing supply chain pressures
in aerospace, as well as the broader macro-economic situation and geopolitical
uncertainty.
With aircraft build rates increasing through the year, and the continuing
supply chain challenges in aerospace, including the recent fire at one of our
key suppliers, we anticipate trading in our Aerospace Division to be more
weighted to the second half of the year. Overall, the Board anticipates
strong growth for the Group in 2023 in line with its expectations.
We remain on track to drive the Group ROCE to a minimum of 13.5% in line with
our previously stated ambition.
Our strategy and positioning in attractive and structurally resilient core
markets, combined with our sector leading sustainability credentials and
highly relevant technical capabilities, is delivering a strong recovery across
our Aerospace and Flexonics Divisions and enhanced value for our stakeholders.
DAVID SQUIRES
Group Chief Executive Officer
DIVISIONAL REVIEW
Aerospace Division
The Aerospace Division represents 65% (2021 - 66%) of Group revenue and
consists of 14 operating businesses. These are located in North America
(six), the United Kingdom (four), continental Europe (two), Thailand and
Malaysia. This Divisional review is on a constant currency basis, whereby
2021 results have been translated using 2022 average exchange rates and on an
adjusted basis to exclude the charge relating to amortisation of intangible
assets from acquisitions and net restructuring income. The Division's
operating results on a constant currency basis are summarised below:
2022 2021 ((1)) Change
£m £m
Revenue 553.6 471.0 +18%
Adjusted operating profit 20.3 8.4 +142%
Adjusted operating margin 3.7% 1.8% +190bps
((1)) 2021 results translated using 2022 average exchange rates - constant currency.
Divisional revenue increased by £82.6m (17.5%) to £553.6m (2021 - £471.0m)
whilst adjusted operating profit increased by £11.9m (141.7%) to £20.3m
(2021 - £8.4m).
Revenue Reconciliation £m
2021 revenue 471.0
Civil aerospace 81.4
Defence (6.6)
Other 16.8
Disposal of business (9.0)
2022 revenue 553.6
Revenue in the Aerospace Division increased by 17.5% year-on-year on a
constant currency basis, reflecting the overall recovery in demand.
Excluding the prior year £9.0m revenue from Senior Aerospace Connecticut,
which was divested in April 2021, revenue on a constant currency basis
increased by 19.8%. The year-on-year increase reflected the ramp up in civil
aircraft production rates, growth from semi-conductor equipment markets and
ramp up in space programmes reflecting end market growth. This more than
offset the decline in defence, which was affected by the delay in spending as
a consequence of the Continuing Resolution being in place in the USA during
the first half of the year.
The civil aerospace sector had the strongest growth during the period with
Senior's sales increasing by 31.6% compared to prior year. This was
reflective of the significant ramp up in aircraft production rates from the
OEMs resulting in rates being higher in 2022 compared to 2021, driven
particularly by single aisle aircraft including regional and large business
jets, with widebody production rate increases announced towards the end of the
year. In 2022, 21% of civil aerospace sales were from widebody aircraft,
with the other 79% sales being from single aisle, regional and business jets.
Excluding the divestment of Senior Aerospace Connecticut, total revenue from
the defence sector decreased by £6.6m (5.1%) as purchase orders were delayed
due to the late approval of the Appropriations Bill which resulted in the
Continuing Resolution coming into force as well as our sales to F-35 programme
being impacted by customer inventory levels of some of the parts we supply.
Revenue derived from other markets such as space, power & energy, medical
and semi-conductor equipment, where the Group manufactures products using very
similar technology to that used for certain aerospace products, increased by
£16.8m as a result of increased demand in the semi-conductor equipment market
and the ramp up in space satellite programmes reflecting end market growth.
During the period, adjusted operating profit increased by 141.7% to £20.3m
(2021 - £8.4m) and the adjusted operating margin increased by 190 basis
points to 3.7% (2021 - 1.8%). The improved profitability reflected the
volume related operating leverage across our businesses, while price increases
helped offset the impact of material and other inflationary cost increases.
Our operating businesses worked hard to address the persistent supply chain
challenges and mitigate their impact, ensuring service levels for customers
were maintained to the best extent possible. These supply chain constraints
are likely to be evident throughout 2023 and continue to require relentless
management in a number of our operations. These challenges are a function of
the welcome increase in civil aircraft production rates required by the
industry to satisfy the strong demand from airlines and aircraft lessors. We
will continue to work closely with our suppliers and customers to minimise
disruption. Very recently, the situation has been compounded by a fire at
one of our key suppliers in Thailand. We are working closely with the
supplier and our customers to assess and mitigate the specific impact of the
fire.
Both Airbus and Boeing are planning further increases in aircraft production
programmes in 2023 and beyond which gives confidence that civil aerospace
revenue will continue to grow in 2023. With aircraft build rates increasing
through the year, and the continuing supply chain challenges in aerospace,
including the recent fire at one of our key suppliers, we anticipate Aerospace
Division trading to be more weighted to the second half of the year.
The most fuel-efficient single aisle aircraft are in high demand which
underpins planned rate increases:
● Airbus announced at their FY 2022 results that on the A320 Family programme,
they are now progressing towards a monthly production rate of 65 aircraft by
the end of 2024 and 75 in 2026. For the entry-into-service of the A321XLR,
Airbus announced that they expect this to take place in Q2 2024. Airbus
ended 2022 with a backlog of 6,093 A320 Family (2021: 5,839).
● Boeing announced at their full year results that the 737 programme is
stabilising production rate at 31 per month, which is on steady course to
being achieved, with plans to ramp production to approximately 50 per month in
the 2025/2026 timeframe. At their Investor Day in November 2022, they
announced a target of 400-450 737 MAX deliveries in 2023, rising from the low
30s deliveries per month in the beginning of the year and reaching near 40
deliveries per month in H2 2023. As at the end of 2022, Boeing had a 737
firm order backlog of around 3,653 units (2021: 3,414) and 250 737 MAX
aircraft in inventory.
● During 2022, the first customer delivery of the COMAC C919 was completed.
COMAC announced that they have received orders for more than 1200 units and
expect to reach annual production capacity of 150 aircraft in five years.
Recovery in long-haul routes, which typically use widebody aircraft, has been
accelerating in 2022. With the easing of travel restrictions in Asia,
especially recently in China, this is expected to provide added momentum over
the coming year. IATA has signalled that this segment will return to 92% of
2019 levels by 2025 and 104% of 2019 levels by 2026. As a result, both
Boeing and Airbus have announced production rate increases for wide bodies
starting from the end of 2022.
● On widebody aircraft, Airbus announced at their FY 2022 results that the A330
monthly production rate increased to around 3 at the end of 2022 as planned
and they are now targeting to reach a monthly production rate of 4 in 2024.
On the A350 platform, Airbus confirmed the monthly rate is now around 6
aircraft. In order to meet growing demand for widebody aircraft as
international air travel recovers, and following a feasibility study with the
supply chain, it is now targeting a monthly production rate of 9 A350s at the
end of 2025.The company's total widebody backlog was 619 at the end of 2022
(2021: 766).
● Boeing resumed 787 programme deliveries in August 2022, after receiving
approval from the FAA for their plan on inspections and retrofit work. The
787 programme continues at a low production rate with plans to ramp up to five
per month in late 2023 and to 10 per month in the 2025/2026 timeframe. At
their Investor Day in November 2022, they announced a target of 70-80 787
deliveries for 2023. Boeing confirmed at the full year earnings call that
they had 100 787 aircraft in inventory at the end of 2022, which they stated
will be delivered by the end of 2024.
● Boeing reaffirmed on their full year earnings call that the 777X programme
timeline is holding for delivery of the first plane in 2025.
Global business jet activity in 2022 was resilient, continuing the pandemic
bounce. According to WingX Advance, 2022 was a record year as sales were up
10% year-on-year and 14% above pre-pandemic 2019 levels. In 2023, demand is
forecast to normalise to 2019 levels in Europe, with North America sustaining
higher than pre-pandemic activity. Airbus continues to ramp-up A220
production, having increased to 6 per month during 2022. They announced at
their FY 2022 results that they are still on track for rate 14 which they
envisaged by the middle of the decade.
We expect defence revenue to be stable in 2023 compared to prior year.
● Lockheed Martin delivered 141 F-35 aircraft in 2022, below its stated target
of 147-153, as they experienced supplier performance challenges and a delivery
pause & suspension of the Government Furnished Equipment (GFE) engine.
At their full year results, they announced an intention of producing 147-153
aircraft in 2023 and 2024, although deliveries in 2023 will be determined
pending the resumption of engine deliveries and other factors. They continue
to anticipate annual deliveries of 156 aircraft in 2025 and for the
foreseeable future. In Q4 2022, they finalised the F-35 Low-Rate Initial
Production (LRIP) Lots 15-17 production contract with the U.S. Government for
up to 398 aircraft.
In November 2022, Senior completed its acquisition of Spencer Aerospace,
expanding Senior's presence in hydraulic fluid fittings and allowing Senior to
meet customer demand in an area that closely complements existing fluid
conveyance products. Initial integration activities are proceeding well.
Senior Aerospace has a diversified product portfolio of innovative offerings
with many growth opportunities as our customers value Senior's financial
resilience, stability, design and manufacturing expertise and global
footprint. We continue to secure new contracts and contract extensions on
civil platforms and other aerospace markets that will drive our growth. In
2022, new contracts of note that were signed include:
● Senior Aerospace Ketema was awarded multi-year contracts worth in excess of
$30m to supply cryogenic valves for space launch vehicles.
● Senior Aerospace AMT was awarded repeat production contracts worth c.$10m to
supply floor beam assemblies and frames for large commercial aircraft.
● Senior Aerospace Jet Products increased market share for v-blade production
for large commercial aircraft.
● Senior Metal Bellows won a development and certification contract for
implantable medication delivery pumps. This included a proof-of-design
bellow for an intra-aortic balloon pump assembly.
Good progress continues to be made with our fluid conveyance and thermal
management product and technology developments: one example of this is shown
below.
Case study: Proof of concept development for Aerospace Heat Exchangers
Senior's extensive experience in the design and manufacture of fluid
conveyance applications provides significant insight into the system
requirements for various aerospace applications. Our fluid conveyance
products frequently connect to heat exchangers within airframe and engine
applications and, in response to customer requests for a single-source system
provider, we are investing in the design and manufacture of a proof of concept
high-temperature heat exchanger for aerospace applications, building on our
extensive experience gained in producing high performance heat exchangers for
land vehicles and battery thermal management.
We have been able to demonstrate significant performance and weight advantages
by leveraging our Additive Manufacturing (AM) expertise to outperform
'conventional', commonly available, heat exchanger designs. Developing this
new product capability will open significant new markets for Senior and
complements our existing expertise and knowledge in fluid conveyance system
and component design, demonstrating how we can leverage AM techniques and
apply our land vehicles expertise to new aerospace applications.
Flexonics Division
The Flexonics Division represents 35% (2021 - 34%) of Group revenue comprising
12 operations which are located in North America (four), continental Europe
(two), the United Kingdom (two), South Africa, India, and China (two)
including the Group's 49% equity stake in a land vehicle product joint
venture. This Divisional review is on a constant currency basis((2)),
whereby 2021 results have been translated using 2022 average exchange rates
and on an adjusted basis to exclude net restructuring income/costs. The
Division's operating results on a constant currency basis are summarised
below:
2022 2021 ((1)) Change
£m £m
Revenue 295.6 234.6 +26%
Adjusted operating profit 25.4 13.9 +83%
Adjusted operating margin 8.6% 5.9% +270bps
((1)) 2021 results translated using 2022 average exchange rates - constant currency.
Divisional revenue increased by £61.0m (26.0%) to £295.6m (2021 - £234.6m)
and adjusted operating profit increased by £11.5m (82.7%) to £25.4m (2021 -
£13.9m).
Revenue Reconciliation £m
2021 revenue 234.6
Land vehicles 37.1
Power & energy 23.9
2022 revenue 295.6
In Flexonics, strong customer demand in the land vehicle and power &
energy markets in 2022 drove an increase in sales of 26.0% compared to prior
year.
Group sales to land vehicle markets increased by 29.2% as Senior outgrew end
market demand due to higher market share. Senior's sales to the North
American truck and off-highway market increased by £18.7m (25.8%), with
strong demand for on-highway vehicles as production of heavy-duty trucks
increased by 19%. Sales to other truck and off-highway regions, including
Europe and India, increased by £12.0m (45.6%), helped by recent contract wins
entering series production, and end market production growth as supply chain
constraints eased through the year. Group sales to passenger vehicle markets
increased by £6.4m (22.8%) in the year, benefiting from recent contract wins
entering series production in North America and Europe.
In the Group's power & energy markets, sales increased by £23.9m (22.2%)
in the year. Sales to power generation and nuclear markets increased by
£9.3m (26.7%) as efforts to extend powerplant life and maintenance grew.
Sales to oil and gas markets increased by £8.8m (27.1%), as a result of
higher production volumes for upstream. Sales to other power & energy
markets increased by £5.8m.
Adjusted operating profit increased by £11.5m compared to prior period and
the divisional adjusted operating margin increased by 270 basis points to 8.6%
(2021 - 5.9%). This significant improvement in profitability reflected the
volume related operating leverage across our operating businesses and agreed
price increases to offset the impact of inflationary cost increases.
In 2023, Senior's overall sales to land vehicle markets are expected to
outperform end markets due to the launch and ramp up of new programmes. In
terms of the end markets:
● ACT Research is forecasting a 3% decline in North American heavy-duty truck
production in 2023. Pent-up demand for more fuel-efficient engines and
modest pre-buy activity ahead of tighter emission standards coming to be
introduced in 2024 are expected to be offset by slowing macroeconomic
indicators in the US.
● The North American medium-duty diesel truck production is forecast to be
stable in 2023 as backlogs remain elevated, indicating solid pent-up demand.
● IHS Markit Inc. forecasts that European truck and bus production will fall by
1% in 2023 in line with the slowing macroeconomic indicators, while light
vehicle production is forecast to grow by 6% in 2023 with semiconductor
availability improving.
● Indian light vehicle production is forecasted to grow by 8% in 2023.
((2)) The divisional review is presented before the share of the joint venture
results.
Positive momentum is expected in power & energy markets given higher
activity levels in the upstream oil & gas and nuclear sectors:
● The IEA expects world oil demand in 2023 to surpass pre-pandemic levels.
● According to the IEA, global refining capacity is anticipated to expand
slightly in 2023. Tight supply, coupled with a limited appetite for new
refining capacity due to the US federal government's policies on energy, has
led businesses to focus on upgrading and expanding existing facilities,
thereby increasing maintenance and overhaul work.
● In power generation, the IEA forecasts global electricity demand growth in
2023 to be similar as 2022, albeit with some uncertainty around how
macroeconomic growth rates will impact demand.
● In the nuclear sector, 2023 will see nations focus on energy security through
ensuring the smooth operating of existing powerplant and look to further
develop SMRs.
Our innovative technology is a key point of differentiation for the Group, and
we continue to focus our development efforts, with our products applicable
across a diverse range of attractive industrial markets. In 2022, we made
good progress with new product development:
● Senior Flexonics Crumlin supplied prototype Battery Cooling Plates to several
European car companies.
● Senior supplied Prototype Heat Sinks to several tier one electric vehicle
inverter suppliers.
● Senior Flexonics Crumlin secured a production order for Battery Cooling Plates
for a premium sports car manufacturer.
● Senior Flexonics Kassel was named as a partner for the development of a marine
hydrogen powered fuel cell fluid management system.
● Senior Flexonics Bartlett was nominated to supply assemblies for a Solid Oxide
Fuel Cell being developed to replace diesel powered generators.
Good progress continues to be made with our fluid conveyance and thermal
management product and
technology developments in support of the transition to clean energy, with
many active customer engagements.
Case study: Senior Flexonics development of Solid Oxide Fuel Cells
Senior's engineering teams continue to be innovative and develop new products
and processes across a variety of key decarbonisation technologies. One
important innovation relates to solid oxide fuel cells for stationary power
generation. Senior Flexonics is working with a leading OEM to develop a
scalable, cutting-edge assembly and brazing process to enable their system to
reach market leading performance and value. Low volume production will
commence in the next two years and the medium and long-term growth potential
represents a significant opportunity for Senior Flexonics.
OTHER FINANCIAL INFORMATION
Group revenue
Group revenue was £848.4m (2021 - £658.7m). Excluding the favourable
exchange rate impact of £46.3m, Group revenue increased by £143.4m (20.3%),
of which £28.6m related to pricing. Revenue grew in both Aerospace and
Flexonics year-on-year.
Operating profit
Adjusted operating profit increased by £22.4m (367.2%) to £28.5m (2021 -
£6.1m). Excluding the favourable exchange rate impact of £1.3m, adjusted
operating profit increased by £21.1m (285.1%) on a constant currency basis.
After accounting for £0.2m amortisation of intangible assets from
acquisitions (2021 - £nil) and £4.2m net restructuring income (2021 -
£4.4m), reported operating profit was £32.5m (2021 - £10.5m).
The Group's adjusted operating margin increased by 250 basis points, to 3.4%
for the full year. This improved profitability principally reflected volume
related operating leverage across our businesses. Inflationary pressures
were successfully mitigated by diligently managing costs and by increasing
prices and surcharges where possible. Overall price increases of £28.6m
offset material and other inflationary cost increases of £26.0m.
Finance costs and investment income
Finance costs, net of investment income and before interest unwind of deferred
and contingent consideration increased to £8.4m (2021 - £8.0m) and comprise
IFRS 16 interest charge on lease liabilities of £2.5m (2021 - £2.6m), net
finance income on retirement benefits of £1.2m (2021 - £0.4m) and net
interest charge of £7.1m (2021 - £5.8m). This increase was mainly due to
higher underlying interest rates on variable rate debt and foreign exchange
movements on fixed rate USD Private Placement Notes denominated in US Dollars.
Gross finance costs, including interest unwind of deferred and contingent
consideration were £10.6m (2021 - £8.5m) and investment income was £1.9m
(2021 - £0.5m).
Tax charge
The adjusted tax rate for the year was 10.0% (2021 - 136.8% credit), being a
tax charge of £2.0m (2021 - £2.6m credit) on adjusted profit before tax of
£20.1m (2021 - £1.9m loss). The adjusted tax rate benefitted from enhanced
deductions for R&D expenditure in the US, the super-deduction for capital
expenditure in the UK, as well as prior year items.
The reported tax rate was 9.8% charge, being a tax charge of £2.2m on
reported profit before tax of £22.4m. This included £0.2m net tax charge
against items excluded from adjusted profit before tax, of which £0.7m charge
related to net restructuring income and a £0.5m credit related to corporate
undertakings in the year. The 2021 reported tax rate was 2.1% credit, being
a tax credit of £0.5m on reported profit before tax of £23.7m. This
included £2.1m net tax charge against items excluded from adjusted loss
before tax, of which £2.9m related to the corporate undertakings in the year
and £0.6m credit to the revaluation of UK deferred tax assets at the
substantially enacted 25% corporation tax rate effective from 1 April 2023.
Cash tax paid was £3.5m (2021 - £5.3m) and is stated net of refunds received
of £1.1m (2021 - £0.9m) of tax paid in prior periods, including refunds
arising from the offset of tax losses against taxable profits of prior
periods. Tax payments in 2021 were £2.3m higher than they would otherwise
have been as a result of coronavirus relief measures in some countries which
allowed the deferral of tax bills normally due in 2020 into 2021.
Earnings per share
The weighted average number of shares, for the purposes of calculating
undiluted earnings per share, decreased to 415.3 million (2021 - 415.7
million). The decrease arose principally due to the purchase of shares held
by the employee benefit trust during 2022. The adjusted earnings per share
was 4.36 pence (2021 - 0.17 pence). Basic earnings per share was 4.86 pence
(2021 - 5.82 pence). See Note 7 for details of the basis of these
calculations.
Return on capital employed ("ROCE")
ROCE, a key performance indicator for the Group as defined above, increased by
370 basis points to 4.7% (2021 - 1.0%). The increase in ROCE was mainly a
result of the significant increase in adjusted operating profit compared to
prior year.
Cash flow
The Group generated excellent free cash flow of £27.7m in 2022 (2021 -
£14.0m) as set out in the table below:
2022 2021
£m £m
Operating profit 32.5 10.5
Amortisation of intangible assets from acquisitions 0.2 -
Net restructuring income (4.2) (4.4)
Adjusted operating profit 28.5 6.1
Depreciation (including amortisation of software) 49.6 47.8
Working capital and provisions movement, net of restructuring items (12.1) (2.6)
Pension payments above service cost (1.4) (5.1)
Other items(1) 5.6 2.2
Interest paid, net (9.0) (8.0)
Income tax paid, net (3.5) (5.3)
Capital expenditure (30.5) (21.3)
Sale of property, plant and equipment 0.5 0.2
Free cash flow 27.7 14.0
Corporate undertakings (26.7) 46.9
Net restructuring proceeds/(cash paid) 2.1 (0.9)
US Class action lawsuits - (2.3)
Dividends paid (1.2) -
Purchase of shares held by employee benefit trust (4.5) -
Net cash flow (2.6) 57.7
Effect of foreign exchange rate changes (14.2) 0.7
IFRS 16 non-cash additions and modifications including acquisition (9.0) (5.6)
Change in net debt (25.8) 52.8
Opening net debt (153.1) (205.9)
Closing net debt (178.9) (153.1)
(1) Other items comprises £4.3m share-based payment charges (2021 - £3.5m),
£(0.4m) profit on share of joint venture (2021 - £(0.2m)), £1.8m working
capital and provision currency movements (2021 - £(1.1m)) and £(0.1m) profit
on sale of fixed assets (2021 - £nil).
Capital expenditure
Gross capital expenditure of £30.5m (2021 - £21.3m) was 0.8 times
depreciation excluding the impact of IFRS 16 (2021 - 0.6 times). The
disposal of property, plant and equipment raised £0.5m (2021 - £0.2m).
2023 capital investment is expected to be in line with depreciation
(excluding the impact of IFRS 16). We are prioritising new investment on
sustainability related items; important replacement equipment for current
production; and growth projects where contracts have been secured.
Working capital
Working capital increased by £28.3m in 2022 to £131.3m (2021 - £103.0m),
of which £9.3m related to foreign currency movements. As expected, the
underlying increase was reflective of increased activity in our key end
markets along with some supply chain lead times increasing. In 2022, our
effective management of working capital reduced it as a percentage of sales by
10 basis points to 15.5% (2021 - 15.6%). Although we may continue to see an
increase in working capital over the coming year, we will continue our
relentless and effective focus on working capital management.
Retirement benefit schemes
The retirement benefit surplus in respect of the Group's UK defined benefit
pension plan ("the UK Plan") decreased by £20.4m to £51.8m (31 December 2021
- £72.2m) due to £23.2m net actuarial losses, partly offset by £1.4m cash
contributions by the Group, in excess of running costs, and £1.4m net
interest income. Retirement benefit deficits in respect of the US and other
territories increased by £1.1m to £12.1m (31 December 2021 - £11.0m).
The latest triennial actuarial valuation of the UK Plan as at 5 April 2022
showed a surplus of £24.5m (5 April 2019 - deficit of £10.2m). As a
result, and effective from April 2022, the Group's deficit reduction cash
contributions, including administration costs, to the UK Plan ceased on 30
June 2022.
The estimated cash contributions expected to be paid during 2023 in the US
funded plans is £2.3m (£0.4m was paid in 2022).
Net debt
Net debt which includes IFRS 16 lease liabilities increased by £25.8m to
£178.9m at 31 December 2022 (31 December 2021 - £153.1m). As noted in the
cash flow above, the Group generated net cash outflow of £2.6m (as defined in
Note 32(c) of the Financial Statements), after £14.2m adverse foreign
currency movements and £9.0m non-cash changes in lease liabilities due to
additions and modifications of which £4.7m relates to acquisition leases.
Net debt excluding IFRS 16 lease liabilities of £78.4m (31 December 2021 -
£73.2m) increased by £20.6m to £100.5m at 31 December 2022 (31 December
2021 - £79.9m), due to free cash inflow of £27.7m being more than offset by
£26.7m cash outflow in respect of corporate undertakings, £9.1m capital
repayment of leases, £3.6m net cash outflows for dividends and purchase of
shares net of restructuring income and £8.9m adverse foreign currency
movements.
Funding and Liquidity
As at 31 December 2022, the Group's gross borrowings excluding leases and
transaction costs directly attributable to borrowings were £145.3m (31
December 2021 - £132.0m), with 64% of the Group's gross borrowings
denominated in US Dollars (31 December 2021 - 62%). Cash and bank balances
were £43.2m (31 December 2021 - £51.1m).
The maturity of these borrowings, together with the maturity of the Group's
committed facilities, can be analysed as follows:
Gross ((1) Committed
borrowings
facilities
£m )
£m
Within one year 0.5 -
In the second year - -
In years three to five 120.0 255.1
After five years 24.8 24.8
145.3 279.9
((1)) Gross borrowings include other loans and committed facilities, but exclude
leases of £78.4m and transaction costs directly attributable to borrowings of
£(1.6)m.
At the year-end, the Group had committed facilities of £279.9m comprising
private placement debt of £126.2m and revolving credit facilities of
£153.7m. The Group is in a strong funding position, with headroom at 31
December 2022 of £179.4m in cash and undrawn facilities.
During the first half of 2022, the Group refinanced its US revolving credit
facility of $50.0m (£41.3m at year end exchange rate) and extended the
maturity to June 2025. In October 2022, the US private placement debt of
$20m (£16.5m at year end exchange rate) was repaid. In November 2022 the
Group refinanced its UK revolving credit facility and extended the maturity to
November 2026 with a commitment of £115m and in support of the strong ESG
commitments made by Senior and its lenders, we have jointly agreed appropriate
sustainability linked key performance indicators.
The weighted average maturity of the Group's committed facilities at 31
December 2022 was 3.5 years.
The Group has £0.5m (2021 - £nil) of uncommitted borrowings which are
repayable on demand.
The Group has two covenants for committed borrowing facilities, which are
tested at June and December: the Group's net debt to EBITDA (defined in the
Notes to the Financial Headlines on page 2 must not exceed 3.0x and interest
cover, the ratio of EBITDA to interest must be higher than 3.5x. At 31
December 2022, the Group's net debt to EBITDA was 1.47x and interest cover was
9.4x, both comfortably within covenant limits.
During the year the Group implemented a global cash pooling structure which
has enhanced liquidity and cash management, reduced gross debt levels and will
help mitigate rising interest costs moving forward.
Going concern and viability
In accordance with provisions 30 and 31 of the 2018 UK Corporate Governance
Code, the Directors have concluded that there is a reasonable expectation as
to the Group's longer-term viability and have continued to adopt the going
concern basis in preparing the Financial Statements. The full viability
statement can be found on page 82 of the Annual Report & Accounts 2022.
In assessing going concern, taking into account the level of cash and
available committed facilities the Directors concluded that the Group has
sufficient funds, and is forecast to be in compliance with debt covenants at
all measurement dates, to allow it to operate for the foreseeable future (a
period of at least 12 months from the date of approval of the Financial
Statements), even in a severe but plausible downside scenario.
In forming their conclusion, the Board has undertaken a rigorous assessment of
the financial forecasts, key uncertainties, sensitivities, and has reviewed a
severe but plausible downside scenario, which reflects the probability
weighted and cumulative estimated effects of the Group's principal risks and
uncertainties as disclosed on pages 60 to 71 of the Annual Report &
Accounts 2022.
Risks and uncertainties
The principal risks and uncertainties faced by the Group are set out in detail
on pages 60 to 71 of the Annual Report & Accounts 2022.
Responsibility statement of the Directors in respect of the Annual Report
& Accounts 2022
We confirm that to the best of our knowledge:
1. the Financial Statements, as included in the Annual Report & Accounts
2022, prepared in accordance with the applicable set of accounting standards,
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 Strategic Report, set out in the Annual Report & Accounts 2022,
includes a fair review of the development and performance of the business and
the position of the issuer and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the Annual Report & Accounts 2022, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Group's position and performance, business model
and strategy.
By Order of the Board
David Squires Bindi Foyle
Group Chief Executive Officer Group Finance Director
24 February 2023 24 February 2023
Consolidated Income Statement
For the year ended 31 December 2022
Notes Year ended Year ended
2022
2021
£m £m
Revenue 3 848.4 658.7
Trading profit 32.1 10.3
Share of joint venture profit 9 0.4 0.2
Operating profit ((1)) 3 32.5 10.5
Investment income 1.9 0.5
Finance costs (10.6) (8.5)
Corporate undertakings 4 (1.4) 21.2
Profit before tax ((2)) 22.4 23.7
Tax (charge)/credit 5 (2.2) 0.5
Profit for the period 20.2 24.2
Attributable to:
Equity holders of the parent 20.2 24.2
Earnings per share
Basic ((3)) 7 4.86p 5.82p
Diluted ((4)) 7 4.73p 5.73p
((1)) Adjusted operating profit 4 28.5 6.1
((2)) Adjusted profit/(loss) before tax 4 20.1 (1.9)
((3)) Adjusted earnings per share 7 4.36p 0.17p
((4)) Adjusted and diluted earnings per share 7 4.24p 0.17p
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
Year ended Year ended
2022
2021
£m £m
Profit for the period 20.2 24.2
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Losses on foreign exchange contracts - cash flow hedges during the period (4.5) (2.1)
Reclassification adjustments for losses/(gains) included in profit 2.2 (1.3)
Losses on foreign exchange contracts - cash flow hedges (2.3) (3.4)
Foreign exchange gain recycled to the Income Statement on disposal and - (2.9)
restructuring (business closures)
Exchange differences on translation of overseas operations 24.5 (3.8)
Tax relating to items that may be reclassified 0.7 0.8
22.9 (9.3)
Items that will not be reclassified subsequently to profit or loss:
Actuarial (losses)/gains on defined benefit pension schemes (23.1) 19.7
Tax relating to items that will not be reclassified 5.7 (6.4)
(17.4) 13.3
Other comprehensive income for the period, net of tax 5.5 4.0
Total comprehensive income for the period 25.7 28.2
Attributable to:
Equity holders of the parent 25.7 28.2
Consolidated Balance Sheet
As at 31 December 2022
Notes Year ended Year ended
2022
2021
£m £m
Non-current assets
Goodwill 8 199.7 150.2
Other intangible assets 36.2 4.2
Investment in joint venture 9 4.4 3.9
Property, plant and equipment 10 307.2 294.6
Deferred tax assets 10.9 5.7
Retirement benefits 13 51.8 72.2
Trade and other receivables 0.4 0.1
Total non-current assets 610.6 530.9
Current assets
Inventories 194.3 145.2
Current tax receivables 2.1 2.6
Trade and other receivables 126.7 98.0
Cash and bank balances 12c) 43.2 51.1
Total current assets 366.3 296.9
Total assets 976.9 827.8
Current liabilities
Trade and other payables 191.2 143.0
Current tax liabilities 17.7 14.6
Lease liabilities 12.7 0.4
Bank overdrafts and loans 12c) 0.5 14.8
Provisions 16.7 13.8
Deferred consideration 23.4 -
Total current liabilities 262.2 186.6
Non-current liabilities
Bank and other loans 12c) 143.2 116.2
Retirement benefits 13 12.1 11.0
Deferred tax liabilities 4.7 10.5
Lease liabilities 65.7 72.8
Provisions 2.9 2.2
Contingent consideration 28.9 -
Others 7.8 3.4
Total non-current liabilities 265.3 216.1
Total liabilities 527.5 402.7
Net assets 449.4 425.1
Equity
Issued share capital 11 41.9 41.9
Share premium account 14.8 14.8
Equity reserve 6.4 5.8
Hedging and translation reserve 51.5 28.6
Retained earnings 346.5 343.2
Own shares (11.7) (9.2)
Equity attributable to equity holders of the parent 449.4 425.1
Total equity 449.4 425.1
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
All equity is attributable to equity holders of the parent
Issued Share Equity Hedging Trans- Retained Own Total
share
premium
reserve
reserve
lation
earnings
shares
equity
capital
account
reserve
£m £m £m £m £m £m £m £m
Balance at 1 January 2021 41.9 14.8 5.1 (37.2) 75.1 305.1 (11.5) 393.3
Profit for the year 2021 - - - - - 24.2 - 24.2
Losses on foreign exchange contracts - cash flow hedges - - - (3.4) - - - (3.4)
Foreign exchange loss/(gain) recycled to the Income Statement on disposal - - - 2.6 (5.5) - - (2.9)
Exchange differences on translation of overseas operations - - - - (3.8) - - (3.8)
Actuarial gains on defined benefit pension schemes - - - - - 19.7 - 19.7
Tax relating to components of other comprehensive income - - - 0.8 - (6.4) - (5.6)
Total comprehensive income/(expense) for the period - - - - (9.3) 37.5 - 28.2
Share-based payment charge - - 3.5 - - - - 3.5
Tax relating to share-based payments - - - - - 0.1 - 0.1
Use of shares held by employee benefit trust - - - - - (2.3) 2.3 -
Transfer to retained earnings - - (2.8) - - 2.8 - -
Dividends paid - - - - - - - -
Balance at 31 December 2021 41.9 14.8 5.8 (37.2) 65.8 343.2 (9.2) 425.1
Profit for the year 2022 - - - - - 20.2 - 20.2
Losses on foreign exchange contracts - cash flow hedges - - - (2.3) - - - (2.3)
Exchange differences on translation of overseas operations - - - - 24.5 - - 24.5
Actuarial losses on defined benefit pension schemes - - - - - (23.1) - (23.1)
Tax relating to components of other - - - 0.7 - 5.7 - 6.4
comprehensive income
Total comprehensive income/(expense) for the period - - - (1.6) 24.5 2.8 - 25.7
Share-based payment charge - - 4.3 - - - - 4.3
Purchase of shares held by employee benefit trust - - - - - - (4.5) (4.5)
Use of shares held by employee benefit trust - - - - - (2.0) 2.0 -
Transfer to retained earnings - - (3.7) - - 3.7 - -
Dividends paid - - - - - (1.2) - (1.2)
Balance at 31 December 2022 41.9 14.8 6.4 (38.8) 90.3 346.5 (11.7) 449.4
Consolidated Cash Flow Statement
For the year ended 31 December 2022
Notes Year ended Year ended
2022
2021
£m
£m
Net cash from operating activities 12a) 57.7 27.0
Investing activities
Interest received 0.7 0.1
Proceeds on disposal of property, plant and equipment 0.5 0.2
Purchases of property, plant and equipment (28.7) (20.2)
Purchases of intangible assets (1.8) (1.1)
Acquisition of Spencer 14 (25.3) -
Proceeds on disposal activities net of cash balances 14 - 51.7
Net cash (used)/generated in investing activities (54.6) 30.7
Financing activities
Dividends paid (1.2) -
New loans 90.8 20.0
Repayment of borrowings (90.4) (41.1)
Purchase of shares held by employee benefit trust (4.5) -
Repayment of lease liabilities (9.1) (8.4)
Net cash used in financing activities (14.4) (29.5)
Net (decrease)/increase in cash and cash equivalents (11.3) 28.2
Cash and cash equivalents at beginning of period 51.1 23.2
Effect of foreign exchange rate changes 2.9 (0.3)
Cash and cash equivalents at end of period 12c) 42.7 51.1
Notes to the above Financial Statements
For the year ended 31 December 2022
1. General information
These results for the year ended 31 December 2022 are an excerpt from the
Annual Report & Accounts 2022 and do not constitute the Group's statutory
accounts for 2022 or 2021. Statutory accounts for 2021 have been delivered
to the Registrar of Companies, and those for 2022 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 UK-adopted international accounting
standards, this announcement does not itself contain sufficient information to
comply with UK-adopted international accounting standards. Full Financial
Statements that comply with UK-adopted international accounting standards are
included in the Annual Report & Accounts 2022 which is available online at
www.seniorplc.com. Printed copies will be distributed on or soon after 10
March 2023.
At the date of authorisation of the Group's Financial Statements, there are no
relevant and material new standards, amendments to standards or
interpretations which are effective for the year ended 31 December 2022.
3. Segment information
The Group reports its segment information as two operating Divisions according
to the market segments they serve, Aerospace and Flexonics, which is
consistent with the oversight employed by the Executive Committee. The chief
operating decision maker, as defined by IFRS 8, is the Executive Committee.
The Group is managed on the same basis, as two operating divisions.
Segment information for revenue and operating profit and a reconciliation to
the Group profit after tax is presented below:
Aerospace Flexonics Eliminations Total Aerospace Flexonics Eliminations Total
/ central
/ central
costs
costs
Year Year Year Year Year Year Year Year
ended
ended
ended
ended
ended
ended
ended
ended
2022
2022
2022
2022
2021
2021
2021
2021
£m
£m
£m
£m
£m
£m
£m
£m
External revenue 553.0 295.4 - 848.4 438.9 219.8 - 658.7
Inter-segment revenue 0.6 0.2 (0.8) - 0.4 0.1 (0.5) -
Total revenue 553.6 295.6 (0.8) 848.4 439.3 219.9 (0.5) 658.7
Adjusted trading profit 20.3 25.4 (17.6) 28.1 7.9 12.9 (14.9) 5.9
Share of joint venture profit - 0.4 - 0.4 - 0.2 - 0.2
Adjusted operating profit (Note 4) 20.3 25.8 (17.6) 28.5 7.9 13.1 (14.9) 6.1
Amortisation of intangible assets from acquisitions (0.2) - - (0.2) - - - -
Net restructuring income (Note 4) 4.2 - - 4.2 2.2 2.2 - 4.4
Operating profit 24.3 25.8 (17.6) 32.5 10.1 15.3 (14.9) 10.5
Investment income 1.9 0.5
Finance costs (10.6) (8.5)
Corporate undertakings (1.4) 21.2
Profit before tax 22.4 23.7
Tax (charge)/credit (Note 5) (2.2) 0.5
Profit after tax 20.2 24.2
Trading profit and adjusted trading profit is operating profit and adjusted
operating profit respectively before share of joint venture profit. See Note
4 for the derivation of adjusted operating profit.
Segment information for assets and liabilities is presented below:
Assets Year ended Year ended
2022
2021
£m
£m
Aerospace 647.8 506.6
Flexonics 217.3 184.9
Segment assets for reportable segments 865.1 691.5
Unallocated
Central 3.6 4.6
Cash 43.2 51.1
Deferred and current tax 13.0 8.3
Retirement benefits 51.8 72.2
Others 0.2 0.1
Total assets per Consolidated Balance Sheet 976.9 827.8
Liabilities Year ended Year ended
2022
2021
£m
£m
Aerospace 189.5 148.1
Flexonics 79.7 63.9
Segment liabilities for reportable segments 269.2 212.0
Unallocated
Central 19.2 15.4
Loans and Overdrafts 143.7 131.0
Deferred and current tax 22.4 25.1
Retirement benefits 12.1 11.0
Deferred and Contingent consideration 52.3 -
Others 8.6 8.2
Total liabilities per Consolidated Balance Sheet 527.5 402.7
Total revenue is disaggregated by market sectors as follows:
Year Year
ended
ended
2022
2021
£m £m
Civil Aerospace 339.4 244.5
Defence 122.1 125.0
Other 92.1 69.8
Aerospace 553.6 439.3
Land Vehicles 164.1 118.8
Power & Energy 131.5 101.1
Flexonics 295.6 219.9
Eliminations (0.8) (0.5)
Total revenue 848.4 658.7
Other Aerospace comprises space and non-military helicopters and other
markets, principally including semiconductor, medical, and industrial
applications.
4. Adjusted operating profit and adjusted profit/(loss) before tax
The presentation of adjusted operating profit and adjusted profit before tax
measures, derived in accordance with the table below, have been included to
identify the performance of the Group prior to the impact of amortisation of
intangible assets from acquisitions, net restructuring income and the costs
and income associated with corporate undertakings. The Board has adopted a
policy to separately disclose those items, where significant in size, that it
considers are outside the results for the particular year under review and
against which the Board measures and assesses the performance of the business.
The adjustments are made on a consistent basis and also reflect how the
business is managed on a day-to-day basis.
The amortisation charge relates to acquisition of Spencer Aerospace. It is
charged on a straight-line basis and reflects a non-cash item for the reported
year. The Group implemented a restructuring programme in 2019, which
continued through 2020 and 2021 in response to the impact of the COVID-19
pandemic on some of the Group's end markets. Some residual restructuring
activity has continued in 2022. The aerospace manufacturing grant, within
net restructuring income, represents incentives specific to only part of the
Group for a limited time period. Corporate undertakings relate to business
acquisition activities, gain on disposal of a business, bid defence and other
costs relating to corporate activities. None of these charges are reflective
of in year performance. Therefore, they are excluded by the Board and
Executive Committee when measuring the operating performance of the
businesses.
Year ended Year ended
2022
2021
£m
£m
Operating profit 32.5 10.5
Amortisation of intangible assets from acquisitions 0.2 -
Net restructuring income (4.2) (4.4)
Adjusted operating profit 28.5 6.1
Profit before tax 22.4 23.7
Adjustments to profit/loss before tax as above (4.0) (4.4)
Corporate undertakings 1.4 (21.2)
Corporate undertakings - Interest 0.3 -
Total Corporate undertakings 1.7 (21.2)
Adjusted profit/(loss) before tax 20.1 (1.9)
Net restructuring income
In 2020 the Group had focused on taking actions to conserve cash to manage
through the pandemic, including curtailing capital expenditure, tightly
managing working capital and implementing further cost cutting actions. In
2022 there were still some residual activities associated with that. The
decisive actions which we took on restructuring and cost management delivered
the expected benefits. In addition, the Group has continued to review
inventory and asset exposures on programmes that have been reduced, cancelled
or where the Group will no longer participate. As part of the restructuring
focus, we have assessed critically any inventory or asset exposures on these
programmes and written down the carrying values on excess holdings and assets
where there is no alternate use. Where demand has picked up on previously
reduced or cancelled programmes, inventory impairments have been reversed to
the extent that there are confirmed orders in place.
The restructuring resulted in net income of £4.2m (2021 - £4.4m). Of this,
£4.0m income (2021 - £4.2m) related to an aerospace manufacturing grant and
£1.2m net charge related to consultancy and other costs (2021 - £0.4m net
charge). For certain specific programmes, and in conjunction with the focus
on restructuring, management has also identified inventory impairment
reversals of £2.7m (2021 - £1.4m) where customer demand has increased, and
further impairment provisions on property, plant and equipment in 2022 with a
charge of £1.3m (2021 - £0.8m) to cover the risk where there are no
alternative uses.
Net cash inflow related to restructuring activities was £2.1m (2021 - £0.9m
net cash outflow). At 31 December 2022, a restructuring provision of £0.2m
(31 December 2021: £1.3m) was recognised and is expected to be utilised in
2023.
Corporate undertakings
Costs associated with corporate undertakings were £1.7m in 2022, of which
£1.2m of acquisition costs and £0.3m interest unwind of deferred and
contingent consideration relates to the acquisition of Spencer Aerospace in
November 2022 and £0.2m costs relate to other corporate activities. In
2021, net income of £21.2m was recognised, of which £24.2m gain relates to
the disposal of Senior Aerospace Connecticut in April 2021, partly offset by
£3.0m bid defence and costs relating to other corporate activities. See
Note 14 for further details.
5. Tax charge
Year ended Year ended
2022
2021
£m £m
Current tax:
Current year 8.2 7.0
Adjustments in respect of prior periods (1.9) (6.0)
6.3 1.0
Deferred tax:
Current year (3.5) (1.7)
Adjustments in respect of prior periods (0.6) 0.2
(4.1) (1.5)
Total tax charge/(credit) 2.2 (0.5)
The adjusted tax rate for the year was 10.0% (2021 - 136.8% credit), being a
tax charge of £2.0m (2021 -£2.6m credit) on adjusted profit before tax of
£20.1m (2021 - £1.9m loss).
The adjusted tax rate benefits from enhanced deductions for R&D
expenditure in the US, the super-deduction for capital expenditure in the UK,
as well as prior year items.
The reported tax rate was 9.8%, being a tax charge of £2.2m on reported
profit before tax of £22.4m. This included £0.2m net tax charge on items
excluded from adjusted profit before tax. The 2021 reported tax rate was
2.1% credit, being a tax credit of £0.5m on reported profit before tax of
£23.7m.
Cash tax paid was £3.5m (2021 - £5.3m) and is stated net of refunds received
of £1.1m (2021 - £0.9m) of tax paid in prior periods, including refunds
arising from the offset of tax losses against taxable profits of prior
periods. Tax payments in 2021 were £2.3m higher than they would otherwise
have been as a result of coronavirus relief measures in some countries which
allowed the deferral of tax bills ordinarily due in 2020 into 2021.
6. Dividends
No dividends were recorded in the prior period.
Year ended Year ended
2022
2021
£m
£m
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2021 of £nil per share (2020 - -
-£nil)
Interim dividend for the year ended 31 December 2022 of 0.30p per share (2021 1.2 -
-£nil)
1.2 -
Proposed final dividend for the year ended 31 December 2022 of 1.00p per share 4.1 -
(2021 - £nil)
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 Year ended
2022
2021
million
million
Weighted average number of ordinary shares for the purposes of basic earnings 415.3 415.7
per share
Effect of dilutive potential ordinary shares:
Share options 11.6 6.8
Weighted average number of ordinary shares for the purposes of diluted 426.9 422.5
earnings per share
Year ended 2022 Year ended 2021
Earnings and earnings per share Earnings EPS Earnings EPS
£m pence £m pence
Profit for the period 20.2 4.86 24.2 5.82
Adjust:
Amortisation of intangible assets from acquisitions net of tax of £nil (2021 0.2 0.05 - -
- £nil)
Net restructuring income net of tax of £0.7m (2021 - £0.2m tax credit) (3.5) (0.84) (4.6) (1.11)
Corporate undertakings net of tax of £0.5m (2021 - £2.9m) 1.2 0.29 (18.3) (4.40)
Non-cash tax credit - - (0.6) (0.14)
Adjusted earnings after tax 18.1 4.36 0.7 0.17
Earnings per share
- basic 4.86p 5.82p
- diluted 4.73p 5.73p
- adjusted 4.36p 0.17p
- adjusted and diluted 4.24p 0.17p
The denominators used for all basic, diluted and adjusted earnings per share
are as detailed in the table above.
The presentation of adjusted earnings per share, derived in accordance with
the table above, has been included to identify the performance of the Group
prior to the impact of amortisation of intangible assets from acquisitions,
net restructuring income, the costs and income associated with corporate
undertakings and non-cash tax credit. The Board has adopted a policy to
separately disclose those items, where significant in size, that it considers
are outside the earnings for the particular year under review and against
which the Board measures and assesses the performance of the business. See
Note 4 for further details.
8. Goodwill
Goodwill increased by £49.5m during the year to £199.7m (2021 - £150.2m)
due to the acquisition of Spencer Aerospace of £42.0m (see Note 14) and
exchange translation differences of £7.5m.
9. Investment in joint venture
The Group has a 49% interest in Senior Flexonics Technologies (Wuhan) Limited,
a jointly controlled entity incorporated in China which was set up in 2012.
The Group's investment of £4.4m represents the Group's share of the joint
venture's net assets as at 31 December 2022 (2021 - £3.9m).
10. Property, plant and equipment
During the period, the Group spent £28.7m (2021 - £20.2m) on the acquisition
of property, plant and equipment. The Group also disposed of property, plant
and equipment with a carrying value of £0.4m (2021 - £0.2m) for proceeds of
£0.5m (2021 - £0.2m). At 31 December 2022, right-of-use assets were
£70.8m (2021 - £67.4m).
11. Share capital
Share capital as at 31 December 2022 amounted to £41.9m. No shares were
issued during 2021 and 2022.
12. Notes to the Consolidated Cash Flow statement
a) Reconciliation of operating profit to net cash from operating activities
Year ended Year ended
2022
2021
£m
£m
Operating profit 32.5 10.5
Adjustments for:
Depreciation of property, plant and equipment 48.1 46.3
Amortisation of intangible assets 1.7 1.5
Profit on sale of fixed assets (0.1) -
Share-based payment charges 4.3 3.5
Pension payments in excess of service cost (1.4) (5.1)
Corporate undertaking costs (1.4) (4.8)
Share of joint venture (0.4) (0.2)
Increase in inventories (34.2) (7.2)
Increase in receivables (18.8) (16.1)
Increase in payables and provisions 37.5 11.6
Restructuring impairment of property, plant and equipment and software 1.3 3.8
US class action lawsuits - (2.3)
Working capital and provisions currency movements 1.8 (1.1)
Cash generated by operations 70.9 40.4
Income taxes paid (3.5) (5.3)
Interest paid (9.7) (8.1)
Net cash from operating activities 57.7 27.0
b) Free cash flow
Free cash flow, a non-statutory item, enhances the reporting of the
cash-generating ability of the Group prior to corporate activity such as
acquisitions, restructuring, disposal activities, financing and transactions
with shareholders. It is used as a performance measure by the Board and
Executive Committee and is derived as follows:
Year ended Year ended
2022
2021
£m
£m
Net cash from operating activities 57.7 27.0
Corporate undertaking costs 1.4 4.8
Net restructuring cash (received)/paid (2.1) 0.9
US class action lawsuits - 2.3
Interest received 0.7 0.1
Proceeds on disposal of property, plant and equipment 0.5 0.2
Purchases of property, plant and equipment (28.7) (20.2)
Purchases of intangible assets (1.8) (1.1)
Free cash flow 27.7 14.0
c) Analysis of net debt
At 1 Net Non cash Exchange Other At 31
January
cashflow
movement
December
2022 movements((1))
2022
£m £m £m £m £m £m
Cash and bank balances 51.1 (10.8) - 2.9 - 43.2
Overdrafts - (0.5) - - - (0.5)
Cash and cash equivalents 51.1 (11.3) - 2.9 - 42.7
Debt due within one year (14.8) 17.2 - (2.4) - -
Debt due after one year (116.2) (17.6) - (9.4) - (143.2)
Lease Liabilities((1)) (73.2) 9.1 - (5.3) (9.0) (78.4)
Liabilities arising from financing activities (204.2) 8.7 - (17.1) (9.0) (221.6)
Total (153.1) (2.6) - (14.2) (9.0) (178.9)
((1)) Other movements include lease additions and modifications of £4.3m and £4.7m
related to lease acquired on acquisition. Following a review of the lease
liability disclosures in 2022 the presentation of current and non-current
liabilities within the Consolidated Balance Sheet for 31 December 2022 now
reflects the timing of the underlying lease payments. Comparative
information has not been restated as the adjustment is not deemed material.
Year ended Year ended
2022
2021
£m
£m
Cash and cash equivalents comprise:
Cash and bank balances 43.2 51.1
Overdrafts (0.5) -
Total 42.7 51.1
Cash and cash equivalents (which are presented as a single class of assets on
the face of the Consolidated Balance Sheet) comprise cash at bank and other
short-term highly liquid investments with a maturity of three months or less.
d) Analysis of working capital and provisions
Working capital comprises the following:
Year ended Year ended
2022
2021
£m
£m
Inventories 194.3 145.2
Trade and other receivables 126.7 98.0
Trade and other payables (191.2) (143.0)
Working capital, including derivatives 129.8 100.2
Items excluded:
Foreign exchange contracts 1.5 2.8
Total 131.3 103.0
Working capital and provisions movement, net of restructuring items, a
non-statutory cash flow item, is derived as follows:
Year ended Year ended
2022
2021
£m
£m
Increase in inventories (34.2) (7.2)
Increase in receivables (18.8) (16.1)
Increase in payables and provisions 37.5 11.6
Working capital and provisions movement, excluding currency effects (15.5) (11.7)
Items excluded:
Decrease in restructuring related inventory impairment 2.7 1.5
Decrease in net restructuring provision and other receivables 0.7 7.6
Total (12.1) (2.6)
13. Retirement benefit schemes
At 31 December 2022, aggregate retirement benefit liabilities of £12.1m (2021
- £11.0m) comprise the Group's US defined benefit pension funded schemes with
a total deficit of £6.7m (2021 - £5.3m) and other unfunded schemes, with a
deficit of £5.4m (2021 - £5.7m). The retirement benefit surplus of £51.8m
(2021 - £72.2m) comprises the Group's UK defined benefit pension funded
scheme.
The liability and asset values of the funded schemes have been assessed by
independent actuaries using current market values and discount rates.
14. Acquisition and Disposal activities
Acquisition of Spencer Aerospace Manufacturing, LLC.
On 25 November 2022, the Group acquired substantially all of the assets of
Spencer Aerospace Manufacturing, LLC, a leading manufacturer of highly
engineered, high-pressure hydraulic fluid fittings for use in commercial and
military aerospace applications, located in Valencia, California, USA. This
acquisition enhances Senior's industry leading fluid conveyance capabilities
and is an important step in our strategy to optimise our portfolio and
maximise value for shareholders. Integration plans are well defined, and we
are now focused on delivering the growth opportunities we have identified.
The initial consideration was $30m (£24.8m) paid in cash at completion, with
a net working capital adjustment of $0.2m (£0.2m), of which $0.6m (£0.5m)
was paid in cash initially and $0.4m (£0.3m) cash adjustment was received in
January 2023. A further $30m (£24.8m) is to be paid 12 months after
completion. Additionally, there is contingent consideration of $40m
(£33.1m) potentially payable, in milestone amounts, dependent on the
financial performance of Spencer Aerospace during the period between
completion and 31 December 2026. The most likely range of this contingent
element is estimated between $30m and $40m. The amortised cost of deferred
consideration is £23.2m and the fair value of contingent consideration is
£28.7m at the acquisition date. The fair value of contingent
consideration assumes expanding the relationship with Spencer's established
customers and leveraging Senior's strong relationships with OEMs, Tier 1
integrators, and aftermarket customers around the world to exploit
opportunities for Spencer Aerospace. The acquisition was funded using the
Group's existing borrowing facilities.
Set out below is a summary of the fair value of identified assets acquired and
liabilities assumed:
£m
Identifiable intangible assets 31.0
Property, plant and equipment 5.8
Inventories 2.2
Financial assets, excluding cash and cash equivalents 1.7
Cash and cash equivalents -
Lease liabilities (4.7)
Financial liabilities (1.1)
Net assets acquired 34.9
Goodwill 42.0
Total consideration 76.9
Consideration satisfied by:
Cash paid 25.3
Working capital adjustment receivable (0.3)
Deferred and Contingent consideration payable 51.9
Total consideration 76.9
Net cash outflow arising on acquisition:
Cash consideration 25.3
Less: cash and cash equivalents acquired -
Net cash outflow arising on acquisition 25.3
The goodwill of £42.0m 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
expectation that the Group will be able to leverage its wider market access
and strong financial position to generate sustainable financial growth beyond
what Spencer would have potentially achieved as a stand-alone company. The
strong customer relationships that the Group has with OEMs, Tier 1
integrators, and aftermarket customers around the world, will open new
opportunities for Spencer Aerospace. The combined capabilities will provide
greater access to developing market opportunities such as hydrogen
infrastructure and fluid handling. There are strong synergies with Senior's
existing fluid conveyance businesses, and the combination of expertise will
accelerate growth in aerospace and adjacent markets. Goodwill is expected to
be fully tax deductible in accordance with US tax rules.
The intangible assets acquired as part of the acquisition relate mainly to
qualified parts lists and customer relationships, the fair value of which is
dependent on estimates of attributable future revenues, profitability and cash
flows, and are being amortised over 18 and 16 years. The fair value has also
been assigned to the order backlog which are being amortised over 1 year.
The financial assets acquired include trade receivables with a fair value of
£1.6m and a gross contractual value of £1.6m, all of which is currently
expected to be collectible.
Acquisition-related costs of £1.2m are included within corporate undertakings
in the Group's Consolidated Income Statement for the 12 months ended 31
December 2022 (See Note 4).
From the date of acquisition to 31 December 2022, Spencer contributed £0.7m
of external revenue and £(0.1)m to the Group's operating profit before
amortisation of intangible assets from the acquisition of £0.2m. If the
acquisition had been completed on 1 January 2022, Group revenue for the 12
months ended 31 December 2022 would have been £855.9m and Group operating
profit would have been £31.2m.
Disposal activities
On 22nd April 2021, the Group sold its stand alone, build-to-print helicopter
structures operating business, Senior Aerospace Connecticut, based in the
USA. The decision to sell was based on its primary focus on build-to-print
parts for the rotary sector, with proceeds from the sale strengthening the
Group's balance sheet and providing greater flexibility for the Group to
operate within its capital deployment framework. For the year ended 31
December 2021, Senior Aerospace Connecticut external revenue was £8.1m and
operating profit was £0.8m.
A gain of £24.2m arose on disposal after taking fair value of net assets
disposed (£28.4m including £15.1m of goodwill, £7.5m property, plant and
equipment and £5.8m of working capital), offset by net cash consideration of
£49.7m after £1.8m disposal costs, and the previously recorded foreign
exchange gain that has been recycled to the Income Statement of £2.9m.
In 2021 the Group received £0.2m deferred consideration relating to the
disposal of its Aerospace business Senior Aerospace Absolute Manufacturing.
15. Provisions
Provisions include warranty costs of £10.8m (2021 - £6.9m), restructuring of
£0.2m (2021 - £1.3m), and other provisions including contractual matters,
claims and legal costs that arise in the ordinary course of business of £8.6m
(2021 - £7.8m).
16. Contingent liabilities
The Group is subject to various claims which arise from time to time in the
course of its business including, for example, in relation to commercial
matters, product quality or liability, and tax audits. Where the Board has
assessed there to be a more likely than not outflow of economic benefits,
provision has been made for the best estimate as at 31 December 2022 (see Note
15). For all other matters, the Board has concluded that it is not more
likely than not that there will be an economic outflow of benefits. While
the outcome of some of these matters cannot be predicted with any certainty,
the Directors do not expect any of these arrangements, legal actions or
claims, after allowing for provisions already made where appropriate, to
result in significant loss to the Group.
17. Related party transactions
The Group has related party relationships with a number of pension schemes and
with Directors and Senior Managers of the Group.
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