REG - Senior PLC - Half-year Report <Origin Href="QuoteRef">SNR.L</Origin> - Part 2
31/07/2017 07:06
- Part 2: For the preceding part double click ID:nRSe4947Ma
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2017
Notes Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2017 2016 2016
£m £m £m
Net cash from operating activities 12a) 49.9 39.5 100.3
Investing activities
Interest received 0.2 0.1 0.2
Proceeds on disposal of property, plant and equipment 0.1 0.5 0.8
Purchases of property, plant and equipment (19.4) (21.9) (50.7)
Purchases of intangible assets (1.2) (0.9) (2.1)
Proceeds on disposal of business - 1.5 1.3
Loan repayment from joint venture 9 0.3 - 0.5
Net cash used in investing activities (20.0) (20.7) (50.0)
Financing activities
Dividends paid (19.4) (18.3) (26.4)
New loans raised 73.6 26.9 39.2
Repayment of borrowings (77.8) (28.9) (58.7)
Repayments of obligations under finance leases (0.3) (0.4) (0.8)
Purchase of shares held by employee benefit trust (0.1) (1.0) (1.1)
Net cash used in financing activities (24.0) (21.7) (47.8)
Net increase/ (decrease) in cash and cash equivalents 5.9 (2.9) 2.5
Cash and cash equivalents at beginning of period 16.8 11.6 11.6
Effect of foreign exchange rate changes (0.4) 1.9 2.7
Cash and cash equivalents at end of period 12 22.3 10.6 16.8
Notes to the Condensed Consolidated Interim Financial Statements
1. General information
These Condensed Consolidated Interim Financial Statements, which were approved
by the Board of Directors on 28 July 2017, have been reviewed by the auditor,
whose report is set out after theDirectors' Responsibility Statement.
The comparative figures for the year ended 31 December 2016 do not constitute
the Group's statutory accounts for 2016 as defined in Section 434(3) of the
Companies Act 2006. Statutory accounts for 2016 have been delivered to the
Registrar of Companies. The auditor's report on those accounts was
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.
2. Accounting policies
These Condensed Consolidated Interim Financial Statements have been prepared
in accordance with the Disclosure and Transparency Rules of the Financial
Conduct Authority and with IAS 34 "Interim Financial Reporting" as adopted by
the European Union. The Directors have, at the time of approving these
Condensed Consolidated Interim Financial Statements, a reasonable expectation
that the Group has adequate resources to continue in operational existence for
the foreseeable future, a period of at least 12 months from this reporting
date. Accordingly, they continue to adopt the going concern basis of
accounting in preparing these Condensed Consolidated Interim Financial
Statements.
The accounting policies, presentation and methods of computation adopted in
the preparation of these Condensed Consolidated Interim Financial Statements
are consistent with those followed in the preparation of the Group's Annual
Financial Statements for the year ended 31 December 2016 which were prepared
in accordance with International Financial Reporting Standards ("IFRS") as
adopted by the European Union. They do not include all the information
required for full annual financial statements and should be read in
conjunction with the Consolidated Financial Statements of the Group as at and
for the year ended 31 December 2016.
There are no material new standards, amendments to standards or
interpretations which are effective for the half-year ended 30 June 2017.
At the date of authorisation of these Condensed Consolidated Interim Financial
Statements, a number of new standards and amendments to existing standards
have been issued but are not yet effective and, for IFRS 16, not yet endorsed
by the EU. They have not been adopted early in these Condensed Consolidated
Interim Financial Statements. A summary of the impact review performed on
each standard is given below. None of these changes will have an effect on
net cash from operating activities nor on free cash flow.
a) IFRS 9 Financial instruments - Effective for annual periods beginning 1
January 2018, EU endorsed in 2016. This standard covers the classification,
measurement, impairment and derecognition of financial assets and financial
liabilities together with a new hedge accounting model. It will replace IAS
39 Financial
Instruments. The Group does not expect the transition to this standard to
have a material impact on the Condensed Consolidated Interim Financial
Statements.
b) IFRS 15 Revenue from Contracts with Customers - Effective for annual
periods beginning 1 January 2018, EU endorsed in 2016. This standard requires
the separation of performance obligations within contracts with customers and
the contractual value to be allocated to each of the performance obligations.
Revenue is then recognised as each performance obligation is satisfied. This
standard will replace existing revenue recognition standards.
Retrospective application in the comparative year ending 31 December 2017 is
optional. The Group expects that it will not take this optional application
and will apply the standard from the transitional date using the cumulative
effect method. This involves calculating the relevant adjustments required
for contracts not completed as at the transition date of 1 January 2018.
An initial impact assessment has been performed by reviewing all contract
types across the Group. This assessment highlighted that if the standard were
to be applied in 2016, the cumulative impact on adoption
would not be material to either the Group's reported revenue or profit before
tax. The majority of this required adjustment would relate to contracts in
the Aerospace Division where customer contributions of goods may be received
to facilitate the Group's fulfilment of the customer contracts. The standard
requires such goods to be treated as non-cash consideration and recognised at
their fair value in revenue and cost of sales when the performance obligations
in the customer contracts are met. This introduces timing differences when
comparing to the current recognition. There is no impact on the timing of
receipt of cash consideration, which is determined within the underlying
customer contracts. The required adjustment expected at the transition date
will be impacted by future changes such as customer contract renewals,
terminations and modifications, as well as exchange rate fluctuations.
The process of implementation is complex, as all Divisions will be affected
and may need to implement new information systems and processes to collect the
required information. The Group will continue to monitor the impact until the
transition date, providing further quantitative and qualitative measures as
further progress is made on implementation.
c) IFRS 16 Leases - Effective for annual periods beginning 1 January 2019,
subject to EU endorsement.
This standard, which will replace IAS 17, requires lessees to recognise assets
and liabilities for all leases, unless the lease term is 12 months or less or
the underlying asset is low value. As at 31 December 2016, the Group held a
significant number of operating leases which, under IAS 17, are expensed on a
straight-line basis over the lease term.
Retrospective application in the comparative year ending 31 December 2018 is
optional. The Group expects that it will not take this optional application
and will apply the standard from the transitional date using the modified
retrospective approach, adjusting opening retained earnings and not re-stating
comparatives. This involves calculating the right-of-use asset and lease
liability based on the present value of remaining lease payments on all
applicable lease contracts as at the transition date.
The Group has initiated a process to collect operating lease information
across all the Divisions in order to assess the cumulative adjustment on
transition. Based on an initial analysis performed for the year ending 31
December 2016, had the new requirements been adopted in 2016, profit before
tax would have decreased by an immaterial amount, whilst it is estimated lease
liabilities and property, plant and equipment would have increased between
£50m and £70m. This is expected to result in an increase of the Group's
principal lending covenant, the ratio of net debt to EBITDA by 0.2x to 0.5x,
except where it is determined at constant accounting standards. The ranges
disclosed reflect the sensitivity of the adjustment to a +/-3 percentage point
movement in the discount rate used to calculate the present value of the
future cash flow commitments. The discount rate, the renewal of and changes
to the lease portfolio and exchange rates on translation of financial
statements of non-Sterling operations are all subject to change in future
years, which will impact the actual transitional adjustment as at the expected
transition date.
The Group will continue to monitor the impact until the transition date,
providing further quantitative and qualitative measures as progress is made on
implementation.
The preparation of the Condensed Consolidated Interim Financial Statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. The resulting accounting estimates will, by
definition, seldom equal the related actual results. In preparing these
Condensed Consolidated Interim Financial Statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the Consolidated Financial Statements as at and for the year ended 31
December 2016. The Consolidated Financial Statements are available via
Senior's website www.seniorplc.com.
3. Segmental analysis
The Group reports its segment information as two operating divisions according
to the market segments they serve, Aerospace and Flexonics. For management
purposes, the Aerospace Division is managed as two sub-divisions,
Aerostructures and Fluid Systems, in order to enhance management oversight;
however, these are aggregated as one reporting segment as they service similar
markets and customers in accordance with IFRS 8. The Flexonics Division is
managed as a single division.
Business Segments
Segment information for revenue, operating profit and a reconciliation to
entity net profit is presented below:
Aerospace Flexonics Eliminations Total Aerospace Flexonics Eliminations Total
/ central / central
costs costs
Half-year Half-year Half-year Half-year Half-year Half-year Half-year Half-year
ended ended ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2017 2017 2017 2017 2016 2016 2016 2016
£m £m £m £m £m £m £m £m
External revenue 362.3 147.7 - 510.0 323.7 126.8 - 450.5
Inter-segment revenue 0.4 0.1 (0.5) - 0.1 0.1 (0.2) -
Total revenue 362.7 147.8 (0.5) 510.0 323.8 126.9 (0.2) 450.5
Adjusted trading profit 34.6 9.8 (7.2) 37.2 41.1 10.8 (4.9) 47.0
Share of joint venture profit - 0.3 - 0.3 - 0.2 - 0.2
Adjusted operating profit 34.6 10.1 (7.2) 37.5 41.1 11.0 (4.9) 47.2
Profit on sale of fixed assets - - - - 0.1 - - 0.1
Amortisation of intangible assets from acquisitions (4.3) (4.3) - (8.6) (5.6) (4.2) - (9.8)
Operating profit 30.3 5.8 (7.2) 28.9 35.6 6.8 (4.9) 37.5
Investment income 0.1 0.1
Finance costs (5.0) (5.0)
Profit before tax 24.0 32.6
Tax (4.2) (6.1)
Profit after tax 19.8 26.5
The provision of adjusted operating profit and adjusted trading profit,
derived in accordance with the table above, has been disclosed to identify the
performance of the Group prior to the impact of amortisation of intangible
assets from acquisitions and for the half year ended 30 June 2016, profit on
sale of fixed assets. See Note 4 for further details.
Segment information for assets and liabilities is presented below.
30 June 30 June 31 Dec
2017 2016 2016
Assets £m £m £m
Aerospace 425.1 405.1 422.2
Flexonics 150.9 144.1 146.2
Segment assets for reportable segments 576.0 549.2 568.4
Unallocated
Central 4.1 4.5 3.8
Goodwill 309.9 305.8 318.8
Intangible assets from acquisitions 44.7 62.6 54.7
Cash 22.3 13.5 17.5
Deferred and current tax 6.7 10.4 7.3
Retirement benefit asset 10.0 - 4.0
Others 1.5 3.3 1.8
Total assets per Balance Sheet 975.2 949.3 976.3
30 June 30 June 31 Dec
2017 2016 2016
Liabilities £m £m £m
Aerospace 122.2 110.8 117.4
Flexonics 53.0 46.7 41.6
Segment liabilities for reportable segments 175.2 157.5 159.0
Unallocated
Central 7.3 7.2 6.8
Debt 203.2 219.4 214.6
Finance leases 0.7 1.4 1.0
Deferred and current tax 76.0 72.8 76.7
Retirement benefit obligations 13.2 17.0 14.4
Others 1.7 2.3 3.3
Total liabilities per Balance Sheet 477.3 477.6 475.8
4. Adjusted operating profit and adjusted profit before tax
The provision of adjusted operating profit and adjusted profit before tax
measures, derived in accordance with the table below, has been disclosed to
identify the performance of the Group prior to the impact of amortisation of
intangible assets from acquisitions and for the half year ended 30 June 2016,
profit on sale of fixed assets.
Amortisation of intangible assets from acquisitions is a non-cash charge that
relates to prior acquisitions. It has been excluded from the adjusted
measures in order to show the underlying current business performance of the
Group in a consistent manner. This also reflects how the business is managed
on a day-to-day basis.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2017 2016 2016
£m £m £m
Operating profit 28.9 37.5 65.8
Amortisation of intangible assets from acquisitions 8.6 9.8 19.8
Profit on sale of fixed assets - (1) (0.1) -
Adjustments to operating profit 8.6 9.7 19.8
Adjusted operating profit 37.5 47.2 85.6
Profit before tax 24.0 32.6 55.5
Adjustments to profit before tax as above 8.6 9.7 19.8
Adjusted profit before tax 32.6 42.3 75.3
(1) From 2017, the profit or loss on sale of fixed assets is not considered an adjusting item.
5. Tax charge
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Current tax:
Current year 6.7 3.3
Deferred tax:
Current year (2.5) 2.8
4.2 6.1
Corporation tax for the half-year ended 30 June 2017 is calculated at 17.5%
(H1 2016 - 18.7%) on profit before tax. On adjusted profit before tax, an
adjusted tax rate of 20% (H1 2016 - 20%) is charged, representing the estimate
of the weighted average annual corporation tax rate expected for the full
financial year.
6. Dividends
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2016 of 4.62p (2015 - 4.36p) per share 19.4 18.3
Interim dividend for the year ending 31 December 2017 of 2.05p (2016 - 1.95p) per share 8.6 8.1
The interim dividend was approved by the Board of Directors on 28 July 2017
and has not been included as a liability in these Interim Financial
Statements, in accordance with the requirements of IFRS.
7. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Half-year Half-year
ended ended
30 June 30 June
2017 2016
Number of shares million million
Weighted average number of ordinary shares for the purposes of basic earnings per share 418.9 418.8
Effect of dilutive potential ordinary shares:
Share options 2.1 4.5
Weighted average number of ordinary shares for the purposes of diluted earnings per share 421.0 423.3
Half-year Half-year Half-year Half-year
ended ended ended ended
30 June 30 June 30 June 30 June
2017 2017 2016 2016
Earnings EPS Earnings EPS
Earnings and earnings per share ("EPS") £m pence £m pence
Profit for the period 19.8 4.73 26.5 6.33
Adjust:
Amortisation of intangible assets from acquisitions net of tax of £2.3m (H1 2016 - £2.4m) 6.3 1.50 7.4 1.77
Profit on sale of fixed assets net of tax of £nil (H1 2016 - £nil) - - (0.1) (0.03)
Adjusted earnings after tax 26.1 6.23 33.8 8.07
Earnings per share
- basic 4.73p 6.33p
- diluted 4.70p 6.26p
- adjusted 6.23p 8.07p
- adjusted and diluted 6.20p 7.98p
The effect of dilutive shares on the earnings for the purposes of diluted
earnings per share is £nil (2016-£nil).
The denominators used for all basic, diluted and adjusted earnings per share
are as detailed in the table above.
The provision of adjusted earnings per share, derived in accordance with the
table above, has been disclosed to identify the performance of the Group prior
to the impact of amortisation of intangible assets from acquisitions and for
the half year ended 30 June 2016, profit on sale of fixed assets. See Note 4
for further details.
8.Goodwill
The Group tests goodwill annually for impairment or more frequently if there
are indications that goodwill might be impaired.
The change in goodwill from £318.8m at 31 December 2016 (30 June 2016 -
£305.8) to £309.9m at 30 June 2017 reflects a decrease of £8.9m due to foreign
exchange differences.
9. Investment in joint venture
During 2012, the Group set up and has a 49% interest in Senior Flexonics
Technologies (Wuhan) Limited, a jointly controlled entity incorporated in
China. The Group's investment of £2.0m (30 June 2016- £1.2m; 31 December 2016
£1.7m) represents the Group's share of the joint venture's net assets as at 30
June 2017.
At the half year the Group had provided loans of £0.5m (30 June 2016- £1.3m;
31 December 2016 - £0.9m) to the joint venture, £nil (30 June 2016- £1.0m; 31
December 2016 - £nil) is reported as a current asset and £0.5m (30 June 2016-
£0.3m; 31 December 2016- £0.9m) as a non-current asset.
During the half- year to 30 June 2017, £0.3m of the loans were repaid (H1 2016
- £nil) after £0.1m of foreign exchange differences.
10. Property, plant and equipment
During the period, the Group invested £19.4m (H1 2016 - £21.9m) on the
acquisition of property, plant and equipment. The Group also disposed of
machinery with a carrying value of £0.3m (H1 2016 - £0.4m) for proceeds of
£0.1m (H1 2016 - £0.5m).
11. Retirement benefit schemes
Retirement benefit obligations of £13.2m (30 June 2016 - £14.3m; 31 December
2016 - £14.4m) comprise the Group's US defined benefit pension funded schemes
with a total deficit of £5.9m (30 June 2016 - £8.0m; 31 December 2016 - £7.4m)
and other unfunded schemes, with a deficit of £7.3m (30 June 2016 - £6.3m; 31
December 2016 - £7.0m).
The retirement benefit asset of £10.0m (30 June 2016 - £2.7m deficit; 31
December 2016 - £4.0m) 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.
12. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash from operating activities
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Operating profit 28.9 37.5
Adjustments for:
Depreciation of property, plant and equipment 19.1 15.3
Amortisation of intangible assets 9.5 10.6
Loss/(profit) on sale of fixed assets 0.2 (0.1)
Costs on disposal of business - (0.2)
Share of joint venture (0.3) (0.2)
Share-based payment charges 0.9 0.4
Pension payments in excess of service cost (4.7) (4.4)
Operating cash flows before movements in working capital 53.6 58.9
Increase in inventories (6.5) (7.5)
Increase in receivables (13.7) (14.4)
Increase in payables and provisions 23.8 9.0
Working capital currency movements 0.8 (0.5)
Cash generated by operations 58.0 45.5
Income taxes paid (2.7) (1.4)
Interest paid (5.4) (4.6)
Net cash from operating activities 49.9 39.5
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, disposals, financing and transactions with shareholders. It is
derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Net cash from operating activities 49.9 39.5
Interest received 0.2 0.1
Proceeds on disposal of property, plant and equipment 0.1 0.5
Purchases of property, plant and equipment (19.4) (21.9)
Purchase of intangible assets (1.2) (0.9)
Free cash flow 29.6 17.3
c) Analysis of net debt
At Cash flow Exchange At
1 January movement 30 June
2017 2017
£m £m £m £m
Cash 17.5 5.2 (0.4) 22.3
Overdrafts (0.7) 0.7 - -
Cash and cash equivalents 16.8 5.9 (0.4) 22.3
Debt due within one year (44.2) 33.8 0.4 (10.0)
Debt due after one year (169.7) (29.6) 6.1 (193.2)
Finance leases (1.0) 0.3 - (0.7)
Total (198.1) 10.4 6.1 (181.6)
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Cash 22.3 13.5
Overdrafts - (2.9)
Total 22.3 10.6
Cash and cash equivalents (which are presented as a single class of assets on
the face of the Balance Sheet) comprise cash at bank and other short-term
highly liquid investments with a maturity of three months or less.
13. Assets held for sale
In November 2016, the Group entered into a sale agreement to dispose of a
property (land and building) in the Senior Flexonics Bartlett operation, which
is classified as held for sale and presented separately in the Balance Sheet.
The Group continues to market the property despite the sale agreement not
completing during the period.
The major category of assets classified as held for sale is property, plant
and equipment of £4.0m (30 June 2016 - £nil; 31 December 2016 - £4.2m). The
movement in the balance during 2017 relates to foreign exchange differences.
14. Provisions
Current and non-current provisions include warranty costs of £1.8m (30 June
2016 - £1.8m; 31 December 2016 - £2.5m), restructuring costs of £1.6m (30 June
2016 and 31 December 2016 - £nil) and other costs of £0.8m (30 June 2016 -
£nil; 31 December 2016 - £1.1m).
Restructuring costs relate to the closure of the BWT Ilkeston facility, which
is planned to complete during the second half 2017.
15. Share capital
Share capital as at 30 June 2017 amounted to £41.9m (30 June 2016 - £41.9m, 31
December 2016 - £41.9m). No shares were issued during the period.
16. Contingent Liabilities
Contingent liabilities exist in respect of guarantees provided by the Group in
the ordinary course of business for product delivery, performance and
reliability. Various Group undertakings are parties to legal actions or
claims which arise in the ordinary course of business, some of which could be
for substantial amounts. In May 2015, Senior Aerospace Ketema was named as
co-defendant in a putative class action lawsuit and a related lawsuit alleging
property damage filed against Ametek, Inc. in the USA. On January 25, 2017
and March 27, 2017, Senior Aerospace Ketema was named as a co-defendant in
similar lawsuits filed by additional plaintiffs. Each of the lawsuits claim
that Ametek had polluted the groundwater during its tenure as owners of the
site where Senior Aerospace Ketema is currently located, allegedly causing
harm to neighbouring properties and/or creating health risks. While the
outcome of some of these matters cannot precisely be foreseen, the Directors
do not expect any of these arrangements, legal actions or claims, after
allowing for provisions already made, to result in significant loss to the
Group.
17. Financial Instruments
Categories of financial instruments
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Carrying value of financial assets:
Cash and cash equivalents 22.3 13.5
Trade receivables 146.8 150.9
Other receivables 1.9 2.5
Loans and receivables at amortised cost 171.0 166.9
Currency derivatives used for hedging 1.9 2.1
Total financial assets 172.9 169.0
Carrying value of financial liabilities:
Bank overdrafts and loans 203.2 219.4
Obligations under finance leases 0.7 1.4
Trade payables 108.9 91.7
Other payables 53.2 60.4
Financial liabilities at amortised cost 366.0 372.9
Currency derivatives used for hedging 9.5 10.2
Total financial liabilities 375.5 383.1
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Undiscounted contractual maturity of financial liabilities at amortised cost:
Amounts payable:
On demand or within one year 180.2 227.0
In the second to fifth years inclusive 123.0 113.3
After five years 94.3 68.0
397.5 408.3
Less: future finance charges (31.5) (35.4)
Financial liabilities at amortised cost 366.0 372.9
The carrying amount is a reasonable approximation of fair value for the
financial assets and liabilities noted above except for bank overdrafts and
loans, where the Directors estimate the fair value to be £209.0m (30 June 2016
- £232.1m). The fair value has been determined by applying a make-whole
calculation using prevailing treasury bill yields plus the applicable credit
spread for the Group.
Fair values
The following table presents an analysis of financial instruments that are
measured subsequent to initial recognition at fair value. All financial
instruments are measured at level 2, i.e. those fair values derived from
inputs other than quoted prices that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices). There has not been any transfer of assets or liabilities between
levels. There are no non-recurring fair value measurements.
Half-year Half-year
ended ended
30 June 30 June
2017 2016
£m £m
Assets:
Foreign exchange contracts - cash flow hedges 1.9 2.1
Total assets 1.9 2.1
Liabilities:
Foreign exchange contracts - cash flow hedges 9.5 10.2
Total liabilities 9.5 10.2
This information is provided by RNS
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