REG - Senior PLC - Senior plc - 2023 Annual Results
04/03/2024 07:00
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RNS Number : 3521F Senior PLC 04 March 2024
Results for the year ended 31 December 2023
Strong results with adjusted operating profit 61% up on prior year
FINANCIAL HIGHLIGHTS Year ended 31 December change change (
(constant
currency)
(4))
2023 2022
REVENUE £963.5m £848.4m +14% +14%
OPERATING PROFIT £37.9m £32.5m +17% +17%
ADJUSTED FOR:
AMORTISATION OF INTANGIBLE ASSETS FROM ACQUISITIONS £2.2m £0.2m
NET RESTRUCTURING COST/(INCOME) £5.6m £(4.2)m
SITE RELOCATION COST £0.1m £nil
ADJUSTED OPERATING PROFIT ((1)) £45.8m £28.5m +61% +61%
ADJUSTED OPERATING MARGIN ((1)) 4.8% 3.4% +140 bps +140 bps
PROFIT BEFORE TAX £22.8m £22.4m +2% +2%
ADJUSTED PROFIT BEFORE TAX ((1)) £38.3m £20.1m +91% +92%
BASIC EARNINGS PER SHARE 7.52p 4.86p +55%
ADJUSTED EARNINGS PER SHARE ((1)) 10.28p 4.36p +136%
TOTAL DIVIDEND (PAID AND PROPOSED) PER SHARE 2.30p 1.30p +77%
FREE CASH FLOW ((2)) £15.5m £27.7m -44%
NET DEBT EXCLUDING CAPITALISED LEASES ((2)) £132.0m £100.5m £32m increase Net debt / EBITDA((5))
1.6x
NET DEBT ((2)) £203.8m £178.9m £25m increase
ROCE ((3)) 7.1% 4.7% +240bps
Highlights
● Strong trading performance across the Group compared to 2022
● Adjusted EPS of 10.28p includes benefit of 2.54p from release of provisions
for uncertain tax positions
● Continued ROCE improvement, increasing by 240 bps
● Robust core market demand, with a healthy book-to-bill of 1.14
● Healthy balance sheet with net debt / EBITDA((5)) of 1.6x
● Spencer Aerospace revenues increased by over 50% year-on-year
● The Board anticipates good growth for the Group in 2024 in line with its
expectations
● Final dividend of 1.70p, bringing full year dividend to 2.30p, up 77%,
reflecting improved performance and future prospects
Commenting on the results, David Squires, Group Chief Executive Officer of
Senior plc, said:
"Senior has delivered a year of strong trading performance and profit growth
with significant momentum across our two divisions.
Our Flexonics Division performed well in 2023 with double-digit margins and
strong growth in both land vehicle and power & energy. In 2024 we expect
to maintain good performance with land vehicle market demand normalising to
more typical levels and continuing robust demand in our downstream oil &
gas business.
Momentum is building in our Aerospace Division. We have achieved a
diversified position across key civil and defence aircraft platforms and are
benefiting from increasing aircraft build rates which we expect will lead to
higher sales in 2024 and beyond. Supply chain issues are improving as
anticipated and we expect further improvement as 2024 progresses. Beyond
this, we can expect Aerospace performance to continue to improve in 2025 as
production rates increase, supply chain continues to improve, and additional
contractually agreed price rises take effect.
Overall, the Board anticipates good growth for the Group in 2024 in line with
its expectations.
Looking further ahead, we remain on track to achieve our stated ROCE target of
at least 13.5%. Our strategy and positioning in attractive and structurally
resilient core markets, active portfolio management, combined with our sector
leading sustainability credentials and highly relevant technical capabilities,
provides confidence of continuing performance improvements across our
Aerospace and Flexonics Divisions, enhancing value for our stakeholders."
Further information
Bindi Foyle, Group Finance Director, Senior plc +44 (0) 1923 714 725
Tom Bindloss, Head of Treasury and Interim Investor Relations, Senior plc +44 (0) 1923 714 743
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 2023, 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 2023, 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 2023. Therefore, certain Notes and parts of the
Directors' Report reported on are not included within this Release.
(1) Adjusted operating profit and adjusted profit before tax are stated before
£2.2m amortisation of intangible assets from acquisitions (2022 - £0.2m),
£5.6m net restructuring costs (2022 - £4.2m net income) and £0.1m site
relocation cost (2022 - £nil). Adjusted profit before tax is also stated
before costs associated with corporate undertakings of £7.6m (2022 - £1.7m).
A reconciliation of adjusted operating profit to operating profit is shown
in Note 4. Adjusted earnings per share includes the benefit of a release of
£10.5m of provision for uncertain tax positions in the second half of 2023,
of which £3.5m relates to interest (see Note 5 for further details).
Adjusted operating margin is the ratio of adjusted operating profit to
revenue.
(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) 2022 results translated using 2023 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 before tax and before interest, 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 2023 was £84.1m.
● 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 finance 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 definition of adjusted items in the Consolidated Income Statement is
included in Note 4.
The Group's principal exchange rate for the US Dollar applied in the
translation of Income Statement and cash flow items at average 2023 rates was
$1.24 (2022 - $1.24) and applied in the translation of balance sheet items at
31 December 2023 was $1.27 (31 December 2022 - $1.21).
Annual Report
The full Annual Report & Accounts 2023 is now available online at
www.seniorplc.com (http://www.seniorplc.com) . Printed copies will be
distributed on or soon after 15 March 2024.
Webcast
There will be a presentation on Monday 4 March 2024 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 their approval of this 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 2023 results
Senior made good operational and strategic progress in 2023. Trading
performance was strong with revenue growing 14% and adjusted operating profit
growing 61% over 2022.
In 2023, Group revenue increased by 14% on a constant currency basis to
£963.5m with strong double-digit growth across both divisions. This
year-on-year increase reflected the strength in our core markets and our
positioning on key growth platforms across both Aerospace and Flexonics. The
Group benefited from growth in land vehicle and power & energy markets,
the increases in civil aircraft production rates and higher defence spending.
In Flexonics, revenue grew 18% compared to prior year, on a constant currency
basis. This performance was driven by strong customer demand and market
share gains in land vehicle as well as good momentum in power & energy
markets. In Aerospace, revenue increased 11.5% year-on-year on a constant
currency basis. The increase reflected ramp up in civil aircraft production
rates and growth in the defence market more than offsetting the reduction in
sales to semiconductor equipment customers (which is included in "Other
Aerospace").
For the third year running, the Group recorded good order intake reflecting
the broad, diversified and high-quality nature of our business. The 2023
book-to-bill ratio of 1.14 underpins our confidence in further growth in 2024
and beyond.
We measure Group performance on an adjusted basis, which excludes items that
do not directly reflect the underlying trading performance in the period (see
Note 4). References below therefore focus on these adjusted measures.
The Group generated an adjusted operating profit of £45.8m (2022 -
£28.5m). Adjusted operating margin increased by 140 basis points, to 4.8%
for the year. Price increases secured during the period helped to more than
offset the impact of continued inflationary cost increases, including raw
materials. The improved profitability also reflected volume related
operating leverage, particularly across our Flexonics operating businesses.
In Aerospace, trading performance has been in line with expectations whilst
absorbing the significant impact of the Thailand supplier fire and other
supply chain issues in 2023.
As anticipated, the Aerospace supply chain has started to improve and we
expect further progress throughout 2024. The volume of parts shortages and
specific supply chain challenges has reduced considerably, however, there are
still some challenges on certain material and component categories that are
affecting some of our operating businesses in common with the whole industry.
One of the most significant supply chain challenges in 2023 that we have
previously highlighted was the fire at one of our key suppliers in Thailand.
Our team in Thailand proactively managed the consequences of the fire to
help customers, and the supplier in question, to the very best of their
ability. Nonetheless the fire had a significant effect on planned growth and
performance in our Thailand business and it was to the credit of our other
Aerospace businesses that they stepped up to ensure we met our expectations
for the Division as a whole. Progress with the factory rebuild at our
supplier is continuing apace and should be near completion by the end of Q1
although, as previously advised, it will be well into the second half of 2024
before requalification of their parts from the new factory will allow return
to normal operations. Thereafter we are confident that Thailand will see
rapid growth as they have a compelling value proposition that our customers
are keen to take advantage of.
The Group's adjusted profit before tax increased by 91% in 2023 to £38.3m
(2022 - £20.1m). This includes £3.5m benefit (2022 - £nil) from interest
unwind following a simplification of our Americas legal entity ownership
structure, that will therefore not repeat in 2024 (see Note 5).
The adjusted tax credit for 2023 was £4.2m (2022 - a charge of £2.0m) and
includes £7.0m benefit (2022 - £nil) from a release of provision for
uncertain tax positions, following the legal entity simplification described
above. Adjusted earnings per share increased by 136% to 10.28 pence (2022 -
4.36 pence) and includes benefit of 2.54 pence from the above noted release of
interest and tax provisions following the legal entity simplification, that
will not repeat in 2024.
Reported operating profit was £37.9m (2022 - £32.5m) and profit before tax
was £22.8m (2022 - £22.4m). Basic earnings per share increased to 7.52
pence (2022 - 4.86 pence).
The Group generated free cash inflow of £15.5m (2022 - £27.7m) in 2023;
higher year-on-year profits were offset by increased investment in working
capital reflecting production growth. Cash outflows from working capital of
£27.6m (2022 - £12.1m) reflected higher receivables as a result of revenue
growth and planned investment in inventory to enable us to meet the strong
increase in demand from our customers, as well as to mitigate ongoing supply
chain issues in Aerospace. Gross capital expenditure was £35.9m (2022 -
£30.5m) which was 0.9x depreciation (excluding the impact of IFRS 16). Cash
interest paid, net of interest received, was £12.9m (2022 - £9.0m)
reflecting the effect of higher borrowing costs on variable rate debt.
The Group experienced a net cash outflow of £25.5m (2022 - £2.6m) in 2023,
due to free cash inflow of £15.5m (2022 - £27.7m), offset by £25.8m cash
outflows related to corporate undertakings; £6.6m dividends paid; £5.6m
purchase of shares held by the employee benefit trust; and £3.0m net outflows
related to restructuring and the US pension settlement.
The Group's balance sheet remains healthy with a period-end net debt to EBITDA
of 1.6x. The headroom on our committed borrowing facilities at 31 December
2023 was £142.4m. Net debt at the end of December 2023 was £203.8m
(including capitalised leases of £71.8m), an increase of £24.9m from
December 2022, after taking into account favourable currency movements of
£8.5m and a £7.9m increase for lease movements.
ROCE increased by 240 basis points to 7.1% (2022 - 4.7%). The continued
increase in ROCE reflects the 61% increase in adjusted operating profit in
2023. This improvement keeps the Group on track to deliver our stated ROCE
target of at least 13.5%.
The Board has confidence in the Group's performance, financial position and
future prospects, and has approved a final dividend of 1.70 pence per share
(2022 - 1.00 pence). This will be paid on 31 May 2024 to shareholders on the
register at close of business on 3 May 2024. This brings the total
dividends, paid and proposed for 2023, to 2.30 pence per share (2022 - 1.30
pence). We will continue to follow a progressive dividend policy reflecting
earnings per share, free cash flow generation, market conditions and dividend
cover.
Market Overview
Our core Flexonics and Aerospace markets were strong during 2023.
Land Vehicle (21% of Group)
Land vehicle markets experienced good momentum in 2023 with strong growth in
Europe and India and record heavy-duty truck production in North America.
According to Americas Commercial Transportation ("ACT") research, the North
American heavy-duty truck market grew by 8% in 2023 compared to 2022 which was
ahead of their earlier expectations. ACT expects this market to decline by
16% in 2024 reflecting a return to more normal levels of production before
returning to growth in 2025. As stated by S&P, European truck and bus
market production grew by 14% in 2023 and is forecast to decline by 11% in
2024, with growth resuming in 2025. The global commercial vehicle market is
expected to grow at low single-digit compound annual growth rate through the
cycle.
Passenger vehicle production in 2023 continued to benefit from improving
supply chains and pent-up demand. According to S&P, European passenger
vehicle production grew by 12% in 2023 and it is forecast to decline by 3% in
2024. Production of electric vehicles (EVs) grew by 32% during 2023,
representing 12% of all new passenger vehicles.
Power & Energy (15% of Group)
In 2023, power & energy markets grew with higher levels of activity in
upstream oil & gas continuing and good levels of maintenance and overhaul.
In upstream markets oil producers sought to enhance both their existing and
future production capabilities. Investment in exploration, appraisal and
production was high in multiple geographies.
Global oil-refining capacity grew by an estimated 2% in 2023, according to the
International Energy Agency (IEA), with most of this growth in Africa, China,
and India. Capacity growth in North America was flat.
Looking ahead demand for oil in 2024 is anticipated by the IEA to increase by
1%, in line with the growth in supply. Refining capacity is anticipated to
increase by 1% per annum over the next five years. Wood McKenzie forecast
that oil consumption will peak in 2028 as improvements in the efficiency of
the global-vehicle fleet and the adoption of EVs lead to lower demand, while
renewables and nuclear represent a greater share of energy supply.
Civil Aerospace (42% of Group)
Air-passenger traffic volumes continued to recover strongly during 2023.
Revenue Passenger-Kilometres (RPKs) increased by 37% and have now reached 94%
of 2019 (pre-pandemic) levels. Domestic passenger traffic surpassed 2019
RPKs during the year, reaching 104% of 2019 levels, while international
passenger traffic has reached 89% of pre-pandemic levels. Air traffic will
continue to grow driven in particular by demand in Asia-Pacific.
Both single-aisle and wide-body aircraft build rates increased in 2023.
Airbus has confirmed that production of the A320-family of aircraft, which
represented 10% of Group sales in 2023, are planned to move progressively to
75 per month in 2026. On other important Airbus platforms, production of the
A220 remains on track to reach 14 per month in 2026, the A330 rates of 4 per
month in 2024 and the A350 a build rate of 10 per month in 2026.
Boeing has confirmed that production of the B737-MAX, which represented 6% of
Group sales in 2023, increased from 31 aircraft a month in H1 2023 to 38
aircraft per month by the end of 2023. Rates will not increase beyond this
level until approved to do so by the Federal Aviation Administration (FAA).
Boeing has previously said that they plan to increase B737 production to 50
per month over the 2025/2026 timeframe.
During the pause in the expansion of B737-MAX production, Boeing has said that
they will maintain the current master schedule, which for some suppliers may
be above rate 38 per month, to avoid disruptions to the supply chain and
support future production increases once authorised by the FAA.
Production of the B787, currently at 5 per month, is planned to move steadily
to 10 per month by 2025/2026, while production of the B777X has resumed and
the programme's timeline of reaching a build rate of 4 per month by 2025
remains unchanged.
Defence (14% of Group)
Senior's sales to the defence sector are focused primarily on the US-military
aircraft market.
The Group is well placed with good content on the F-35 Joint Strike Fighter,
mature programmes such as the C‑130J and A400M transport aircraft,
Eurofighter and the newer T-7A Red Hawk trainer programme.
Lockheed Martin has stated that they expect to produce F-35 at a rate of 156
aircraft per annum over the next five years.
The first T-7A advanced trainer aircraft from the production line was
delivered to the US Air Force (USAF) in November 2023 for flight testing.
The USAF have awarded Boeing a contract for 351 of the aircraft, with entry
into service expected in 2027.
Other Aerospace (Adjacent Markets) (8% 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 semiconductor equipment, medical- device and space
markets.
Using our world class bellows technology, we manufacture highly engineered
proprietary products to provide unique solutions for semiconductor
manufacturing equipment and low-earth orbit satellites. Demand in the
semiconductor equipment market is anticipated to remain flat during H1 2024
before beginning to recover in the second half.
The low-earth orbit satellite market is expected to grow at a compound annual
growth rate of 15% between 2023 and 2030 driven by demand for high-speed and
low-cost broadband, growing advancements in satellite network and potential
uses for laser-based space optical communications.
Delivery of Group Strategy
Senior has a compelling strategy to maximise value for shareholders. Our
Purpose is "we help engineer the transition to a sustainable world for the
benefit of all our stakeholders", further explained on pages 4 and 5 of the
Annual Report & Accounts 2023.
To achieve our strategy, we will continue to:
· strengthen our strategic focus on IP-rich fluid conveyance and
thermal management products;
· 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 our stated
target of at least 13.5% ROCE.
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
emission reductions 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. 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 on pages 42 and 47 of the Annual Report & Accounts
2023.
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 as part of our 'one foot in today, one
foot in tomorrow' approach. 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, see
pages 16 and 37 of the Annual Report & Accounts 2023. This strategy,
along with our well-capitalised businesses, provides a solid foundation to
support our future growth aspirations.
Spencer Aerospace
Acquired in November 2022, the integration of Spencer Aerospace is progressing
well. Sales grew over 50% versus prior year and order intake underpins
further strong growth expected in 2024. In addition, Spencer Aerospace is
working collaboratively with our French Aerospace business, Ermeto, which has
qualified hydraulic fittings for European Aerospace customers.
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 its 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, overall effectiveness and
returns, we actively review our overall portfolio of operating businesses and
evaluate them in terms of their strategic fit within the Group in order to
maximise Group operating efficiency and optimal value to shareholders.
We continue to explore strategic options for our Aerostructures business which
includes the potential divestment of the business.
Sustainability
Our dedication to sustainability is ingrained in our core Values, forming the
foundation of our Purpose.
Our Environmental, Social and Governance (ESG) programmes are dynamic and
continually advancing. Notably, we have earned a distinguished "A" rating
from CDP for our work during 2023 on climate disclosure and action. In
addition, we also attained the highest leadership rating for our 2022 Supplier
Engagement programme. These achievements underscore our ongoing commitment
to sustainability, reflecting our proactive stance in addressing environmental
challenges and fostering positive social and governance practices.
In 2023, our ambitious Net Zero science-based emission reduction targets
received verification from the Science Based Targets initiative ("SBTi").
Senior's verified SBTi targets, using 2018 as a base year are:
● commitment to reach Net Zero greenhouse gas emissions across the value chain
by 2040;
● near-term, commitment to reduce absolute Scope 1 and 2 greenhouse gas
emissions 30% by 2025, and that 82% of suppliers by spend covering purchased
goods and services and capital goods will have science-based targets by 2025;
and
● commitment to reduce absolute Scope 1, 2 and 3 greenhouse gas emissions 90% by
2040.
SBTi's Target Validation Team assessed Senior's Scope 1 and 2 near-term and
long-term target ambitions and Scope 3 long-term ambition and has determined
that they are in line with the Paris Agreement targets to limit global warming
to a 1.5°C trajectory.
In addition, SBTi commended Senior on the ambition of their overall target,
which is the highest designation available through the SBTi process.
In 2023, we have again made good progress with our key sustainability metrics
and activities:
Environment
● We remain on track to achieve our Scope 1, 2 and 3 Science Based Target
initiative ("SBTi") verified Near Term Targets.
● Verification of our long-term Net Zero carbon reduction targets.
● 48% of our electricity was sourced from renewable energy, an increase from 41%
in 2022.
● Recycled 95.1% of waste produced, compared to 94.8% in 2022.
Social
● Following our 2022 Global Employee Opinion Survey our operating businesses
continue to work on implementing their action plans and communicate progress
to employees. We will run the next survey in May 2024.
● Our Lost Time Injury Illness Rate reduced to 0.32 in 2023, an improvement from
0.38 at the end of 2022. Our Total Recordable Injury Illness Rate improved
from 0.93 in 2022 to 0.63 in 2023.
● Currently, 57% of the Board Directors are female, including the Chair of the
Audit Committee, the Senior Independent Director, who is also Chair of the
Remuneration Committee, and the Group Finance Director. The Chair of the
Audit Committee is also the non-executive Director with Board responsibility
for employee engagement. Two of the Directors (29%) are from ethnic minority
backgrounds.
Governance
● The Board approved the Group's Human Rights Policy, demonstrating commitment
to do business in a responsible way and respecting the human rights of our
workers and everyone we engage with.
● Introduction for 2024 of two new non-financial performance measures (carbon
reduction and employee engagement) to the Company's annual bonus targets.
Further information on Senior's sustainability activities can be found on
pages 16 to 37 of our Annual Report & Accounts 2023.
Outlook
Overall, the Board anticipates good growth for the Group in 2024 in line with
its expectations.
Momentum is building in our Aerospace Division. We have achieved a
diversified position across key civil and defence aircraft platforms and are
benefiting from increasing aircraft build rates which we expect will lead to
higher sales in 2024 and beyond. Supply chain issues are improving as
anticipated and we expect further improvement as 2024 progresses. Beyond
this, we can expect Aerospace performance to continue to improve in 2025 as
production rates increase, supply chain continues to improve, and additional
contractually agreed price rises take effect.
Our Flexonics Division performed well in 2023 with double-digit margins and
strong growth in both land vehicle and power & energy. In 2024 we expect
to maintain good performance with land vehicle market demand normalising to
more typical levels and continuing robust demand in our downstream oil &
gas business.
Looking further ahead, we remain on track to achieve our stated Group ROCE
target of at least 13.5%. Our strategy and positioning in attractive and
structurally resilient core markets, active portfolio management, combined
with our sector leading sustainability credentials and highly relevant
technical capabilities, provides confidence of continuing performance
improvements across our Aerospace and Flexonics Divisions, enhancing value for
our stakeholders.
DAVID SQUIRES
Group Chief Executive Officer
DIVISIONAL REVIEW
Flexonics Division
The Flexonics Division represents 36% (2022 - 35%) of Group revenue and
consists of 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, presented before the share of the
joint venture results, is on a constant currency basis, whereby 2022 results
have been translated using 2023 average exchange rates and on an adjusted
basis to exclude net restructuring costs and site relocation costs. The
Division's operating results on a constant currency basis are summarised
below:
2023 2022 ((1)) Change
Revenue £348.0m £294.9m +18.0%
Adjusted operating profit £37.5m £25.3m +48.2%
Adjusted operating margin 10.8% 8.6% +220bps
((1)) 2022 results translated using 2023 average exchange rates - constant currency.
Divisional revenue increased by £53.1m (18.0%) to £348.0m (2022 - £294.9m)
and adjusted operating profit increased by £12.2m (48.2%) to £37.5m (2022 -
£25.3m). See Note 3 for a reconciliation of adjusted and reported operating
profit.
Revenue Reconciliation £m
2022 revenue 294.9
Land vehicle 37.9
Power & energy 15.2
2023 revenue 348.0
In Flexonics, strong customer demand and market share gains in land vehicle as
well as good momentum in power & energy markets increased sales in 2023 by
18.0% compared to the prior year, with double-digit growth in all core
markets.
Group sales to land vehicle markets increased by 23.1% driven by increased
market and customer demand and market share gains for both commercial and
passenger vehicles. Senior's sales to the truck and off-highway market
increased by £10.4m (11.4%) in North America and by £12.4m (39.6%) in
Europe, whilst also growing in India. Our strong sales in truck markets were
aided by production increases on recently won contracts. Group sales to
passenger vehicle markets increased by £14.7m (43.1%) in the year, benefiting
from the launch and ramp up of new programmes in North America and Europe.
In the Group's power & energy markets good momentum continued as sales
increased by £15.2m (11.6%) in the year. Sales to oil & gas customers
increased by £13.0m (31.8%), as a result of higher demand mainly from
upstream activity as well as growth in downstream maintenance and overhaul
activity. Sales to power generation and nuclear markets decreased by £3.2m
(7.3%) as growth in nuclear was offset by the non-repeat of prior year catch
up maintenance activity in powerplants. Sales to other industrial markets
increased by £5.4m reflecting growth in sales to aerospace, medical and steel
industry customers.
Adjusted operating profit increased by £12.2m compared to prior year and the
divisional adjusted operating margin increased by 220 basis points to 10.8%
(2022 - 8.6%). This significant improvement in profitability reflected the
volume related operating leverage across our operating business and the
benefits from recurring price increases and one-off cost recoveries which
offset inflationary cost increases.
After a strong performance in 2023, Senior's overall sales to land vehicle
markets in 2024 are expected to reflect the market outlook for more normalised
levels of production. In terms of the end markets:
● ACT Research is forecasting a 16% decline in North American heavy-duty truck
production in 2024. Following the strength in the market during 2023, demand
is anticipated to normalise in 2024 before returning to growth in 2025;
● North American medium-duty truck production is forecast to decline by 11% in
2024 due to the need for high inventory levels to correct, before growing
again in 2025;
● S&P forecasts that European truck and bus production will fall by 11% in
2024 due to macro headwinds including inflation and higher financing costs.
Subsequently growth will be driven by replacement demand and the need to
comply with new environmental regulations. In 2025, growth of 4% is expected
by S&P; and
● Light-vehicle production is forecast to fall by 3% in Europe and grow by 3% in
India in 2024.
In power & energy markets we anticipate a rebalancing of inventory by our
upstream oil & gas customers in 2024, however, activity levels in the more
important downstream and nuclear sectors are likely to remain strong. In
terms of the end markets:
● activity in upstream oil & gas markets is anticipated to remain positive
in 2024 as investment to increase production continues. Global demand for
oil is forecast to increase by ~1% in 2024, and grow at this rate each year
until 2028, according to the IEA;
● oil refining capacity is forecast to expand by 1% per annum. Growth in Asia
will be offset by rationalisation of refining capacity in OECD countries where
the peak in demand for oil is anticipated to occur first; and
● global demand for petrochemicals is forecast to increase by ~2% per annum
until 2030 according to the IEA. Growth in production capacity will be
concentrated in certain markets; India, the Middle East and the US.
We will monitor end market conditions carefully across the various regions in
which we operate and seek to maximise growth opportunities.
Aerospace Division
The Aerospace Division represents 64% (2022 - 65%) of Group revenue and
consists of 14 operations. These are located in North America (six), the
United Kingdom (four), France (two), Thailand and Malaysia. This Divisional
review is on a constant currency basis, whereby 2022 results have been
translated using 2023 average exchange rates and on an adjusted basis to
exclude amortisation of intangible assets from acquisitions and net
restructuring costs/income. The Division's operating results on a constant
currency basis are summarised below:
2023 2022 ((1)) Change
Revenue £616.5m £553.0m +11.5%
Adjusted operating profit £27.0m £20.3m +33.0%
Adjusted operating margin 4.4% 3.7% +70bps
((1)) 2022 results translated using 2023 average exchange rates - constant currency.
Divisional revenue increased by £63.5m (11.5%) to £616.5m (2022 - £553.0m)
whilst adjusted operating profit increased by £6.7m (33.0%) to £27.0m (2022
- £20.3m). See Note 3 for a reconciliation of adjusted and reported
operating profit.
Revenue Reconciliation £m
2022 revenue 553.0
Civil aerospace 72.0
Defence 10.4
Other adjacent markets (18.9)
2023 revenue 616.5
Revenue in the Aerospace Division increased by 11.5% year-on-year on a
constant currency basis. The year-on-year increase reflected the ramp up in
civil aircraft production rates and growth in the defence market. As
anticipated, sales to semiconductor equipment customers (which are included in
our "Other Aerospace" (adjacent markets) segment within Aerospace Division)
reduced due to lower cyclical market demand.
The civil aerospace sector had the strongest growth during the year with
Senior's sales increasing by 21.3%. Aircraft production rates were higher in
2023 compared to 2022, with key platforms, both single aisle and widebody
aircraft, contributing to the growth. 22% of civil aerospace sales were from
widebody aircraft in 2023, with the other 78% of sales being from single
aisle, regional and business jets.
Total revenue from the defence sector increased by £10.4m (8.5%) primarily
from the increased demand for legacy platforms and higher aftermarket.
Revenue in our Aerospace Division derived from adjacent markets such as space,
power & energy, medical and semiconductor equipment, where the Group
manufactures products using very similar technology to that used for certain
aerospace products, decreased by £18.9m (20.5%). This is primarily as a
result of the decrease in demand from the semiconductor equipment market.
During the period, adjusted operating profit increased by 33.0% to £27.0m
(2022 - £20.3m) and the adjusted operating margin increased by 70 basis
points to 4.4% (2022 - 3.7%). Price increases secured during the period more
than offset the impact of continued inflationary cost increases, including raw
materials. As expected, inefficiencies largely caused by certain supply
chain challenges are temporarily dampening volume related drop through
benefits. Overall trading performance has been in line with expectations
whilst absorbing the significant impact of the Thailand supplier fire and
other supply chain issues in 2023.
As anticipated, the Aerospace supply chain has started to improve and we
expect further progress throughout 2024. The volume of parts shortages and
specific supply chain challenges has reduced considerably, however, there are
still some issues with certain material and component categories that are
affecting some of our operating businesses in common with the whole industry.
One of the most significant supply chain challenges in 2023 that we have
previously highlighted was the fire at one of our key suppliers in Thailand.
Our team in Thailand proactively managed the consequences of the fire to
help customers, and the supplier in question, to the very best of their
ability. Nonetheless the fire had a significant effect on planned growth and
performance in our Thailand business and it was to the credit of our other
Aerospace businesses that they stepped up to ensure we met our expectations
for the Division as a whole. Progress with the factory rebuild at our
supplier is continuing apace and should be near completion by the end of Q1
although, as previously advised, it will be well into the second half of 2024
before requalification of their parts from the new factory will allow return
to normal operations. Thereafter we are confident that Thailand will see
rapid growth as they have a compelling value proposition that our customers
are keen to take advantage of.
Momentum is building in our Aerospace Division. We have achieved a
diversified position across key civil and defence aircraft platforms and are
benefiting from increasing aircraft build rates which we expect will lead to
higher sales in 2024 and beyond. Supply chain issues are improving as
anticipated and we expect further improvement as 2024 progresses. Beyond
this, we can expect Aerospace performance to continue to improve in 2025 as
production rates increase, supply chain continues to improve, and additional
contractually agreed price rises take effect.
Both Airbus and Boeing are planning increases in build rates in 2024 and
beyond. In terms of end markets:
● demand for large commercial aircraft continued to recover strongly with order
levels for single-aisle aircraft reaching a new peak in 2023. Airbus
received 1,675 net orders for A320 family aircraft during the year. They
confirmed at their FY2023 results that the A320 Family programme continues to
progress to a build rate of 75 in 2026 as they attempt to meet this strong
demand;
● Boeing achieved strong growth in its single-aisle order book, which increased
by 883 in 2023. Whilst Boeing is having to limit the production of its
B737-MAX model to 38 per month, it has asked suppliers to maintain production
of parts at previously agreed levels. Any further increase in production
needs approval from the FAA. Boeing had previously stated that, following
achieving a production rate of 38 aircraft per month, it was aiming to
increase production of B737-MAX aircraft to 50 per month by the 2025/2026
timeframe;
● the recovery in the long-haul air-passenger market continued during 2023.
International passenger traffic is now at 89% of 2019 levels according to
IATA. Orders for wide-body aircraft rose significantly as airlines responded
to this recovery by seeking to grow and modernise their fleets. Both Airbus
and Boeing are aiming to meet this demand by raising production rates of
wide-body aircraft;
● Airbus has confirmed production rates of its A330 wide-body aircraft at four
per month and is targeting an increase in the production rate of A350 aircraft
from nine per month currently to 10 per month in 2026; and
● Boeing, meanwhile, have announced the resumption of production of the B777X,
with a goal of producing 4 per month in 2025/2026, and an increase in the
production of the B787 from 5 per month currently, to 10 per month in
2025/2026.
In the defence market, Senior has a presence on multiple military aircraft
programmes including the F-35, C-130J and A400M. Lockheed Martin has
confirmed that they anticipate production of 156 F-35 aircraft per annum for
the foreseeable future. Senior is also well positioned on the T-7A
fighter-jet training aircraft with Low-Rate Initial Production due to begin in
2024.
In other adjacent markets, demand in the semiconductor equipment market is
anticipated to remain flat during H1 2024 before beginning to recover in the
second half. In the longer term the proliferation of low earth orbit
satellites and semiconductor markets provides growth opportunities.
OTHER FINANCIAL INFORMATION
Group revenue
Group revenue was £963.5m (2022 - £848.4m). Excluding the adverse exchange
rate impact of £1.3m, Group revenue increased by £116.4m (13.7%), with
growth across both Aerospace and Flexonics year-on-year.
Operating profit
Adjusted operating profit increased by £17.3m (60.7%) to £45.8m (2022 -
£28.5m). Excluding the adverse exchange rate impact of £0.1m, adjusted
operating profit increased by £17.4m (61.3%) on a constant currency basis.
After accounting for £2.2m amortisation of intangible assets from
acquisitions (2022 - £0.2m), £5.6m net restructuring cost (2022 - £4.2m net
income) and £0.1m site relocation costs (2022 - £nil), reported operating
profit was £37.9m (2022 - £32.5m).
The Group's adjusted operating margin increased by 140 basis points, to 4.8%
for the full year. This improved profitability principally reflected volume
related operating leverage across our businesses, whilst absorbing the impact
of disruption caused by supply chain issues. Inflationary pressures were
successfully more than offset by increasing prices and surcharges.
Finance costs and income
Finance costs, net of finance income and before interest unwind of deferred
and contingent consideration decreased to £7.5m (2022 - £8.4m) and comprise
IFRS 16 interest charge on lease liabilities of £2.9m (2022 - £2.5m), net
finance income on retirement benefits of £2.1m (2022 - £1.2m), net interest
charge of £10.2m (2022 - £7.1m) and interest unwind on uncertain tax
positions of £3.5m (2022 - £nil), which will not repeat in 2024 and is
described further below in the tax section. The £3.1m increase in net
interest charge was mainly driven by higher underlying interest rates on
variable rate debt and higher levels of indebtedness in 2023 versus the prior
year.
Gross finance costs, including interest unwind of deferred and contingent
consideration were £20.5m (2022 - £10.6m) and finance income was £10.1m
(2022 - £1.9m), which includes the benefit of interest unwind on uncertain
tax positions of £3.5m (2022 - £nil).
Tax credit / charge
The adjusted tax rate for the year was 11.0% credit (2022 - 10.0% charge),
being a tax credit of £4.2m (2022 - £2.0m charge) on adjusted profit before
tax of £38.3m (2022 - £20.1m). The adjusted tax rate benefitted from a
release of £7.0m of provision for uncertain tax positions in the second half
of 2023 as described below. The adjusted tax rate also benefitted from
enhanced R&D deductions in the US, the UK Super-deduction for capital
expenditure and the geographical mix of taxable profits.
Towards the end of 2023, the Group implemented a series of steps to simplify
the legal ownership of its Americas legal entity holding structure. As part
of the exercise, provisions held for estimated uncertain tax positions around
the historical establishment of the Americas legal structure were reassessed.
As a result, in accordance with IAS 12 and IFRIC 23 (Uncertainty over Income
Tax Treatments), provisions for the uncertain tax positions of £7.0m and
associated interest of £3.5m have been released to the consolidated income
statement during the year.
The reported tax rate was 36.4% credit, being a tax credit of £8.3m on
reported profit before tax of £22.8m. This included £7.0m credit related
to the release of provision for uncertain tax positions as described above and
£4.1m net tax credit against items excluded from adjusted profit before tax,
of which £0.6m credit related to amortisation of intangible assets from
acquisitions, £1.5m credit related to net restructuring costs, £0.1m credit
related to site relocation costs and £1.9m credit related to corporate
undertakings in the year. The 2022 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.
Cash tax paid was £5.6m (2022 - £3.5m) and is stated net of refunds received
of £2.8m (2022 - £1.1m) of tax paid in prior periods, arising from the
offset of tax losses against taxable profits of prior periods.
Earnings per share
The weighted average number of shares, for the purposes of calculating
undiluted earnings per share, decreased to 413.3 million (2022 - 415.3
million). The decrease arose principally due to the purchase of shares held
by the employee benefit trust partly offset by shares released from the trust
to satisfy the vesting of certain share-based payments during 2023. The
adjusted earnings per share was 10.28 pence (2022 - 4.36 pence), which
includes benefit of 2.54 pence from the release of the provision for uncertain
tax positions as described above, that will not repeat in 2024. Basic
earnings per share was 7.52 pence (2022 - 4.86 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
240 basis points to 7.1% (2022 - 4.7%). 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 free cash flow of £15.5m in 2023 (2022 - £27.7m) as set
out in the table below:
2023 2022
£m £m
Operating profit 37.9 32.5
Amortisation of intangible assets from acquisitions 2.2 0.2
Net restructuring cost/(income) 5.6 (4.2)
Site relocation costs 0.1 -
Adjusted operating profit 45.8 28.5
Depreciation (including amortisation of software) 49.5 49.6
Working capital and provisions movement, net of restructuring items (27.6) (12.1)
Pension contributions (1.4) (2.9)
Pension service and running costs 1.3 1.5
Other items((1)) 1.6 5.6
Interest paid, net (12.9) (9.0)
Income tax paid, net (5.6) (3.5)
Capital expenditure (35.9) (30.5)
Sale of property, plant and equipment 0.7 0.5
Free cash flow 15.5 27.7
Corporate undertakings (25.8) (26.7)
Net restructuring (cash paid)/proceeds (2.1) 2.1
US pension settlement (0.9) -
Dividends paid (6.6) (1.2)
Purchase of shares held by employee benefit trust (5.6) (4.5)
Net cash flow (25.5) (2.6)
Effect of foreign exchange rate changes 8.5 (14.2)
IFRS 16 non-cash additions and modifications including acquisition (7.9) (9.0)
Change in net debt (24.9) (25.8)
Opening net debt (178.9) (153.1)
Closing net debt (203.8) (178.9)
(1) Other items comprises £4.1m share-based payment charges (2022 - £4.3m),
£(1.0m) profit on share of joint venture (2022 - £(0.4m)), £(1.3m) working
capital and provision currency movements (2022 - £1.8m) and £(0.2m) profit
on sale of fixed assets (2022 - £(0.1m)).
Capital expenditure
Gross capital expenditure of £35.9m (2022 - £30.5m) was 0.9 times
depreciation excluding the impact of IFRS 16 (2022 - 0.8 times). The
disposal of property, plant and equipment raised £0.7m (2022 - £0.5m).
2024 capital investment is expected to be slightly above depreciation
(excluding the impact of IFRS 16). We are prioritising new investment on
growth projects where contracts have been secured, important replacement
equipment for current production and sustainability related items.
Working capital
Working capital increased by £29.6m in 2023 to £160.9m as at 31 December
2023 (31 December 2022 - £131.3m), of which £6.6m decrease related to
foreign currency movements. The underlying increase reflects increased
trading in the period. Receivables were higher as a result of revenue growth
and inventory was higher with planned investment to enable us to meet the
strong increase in demand from our customers, as well as to mitigate ongoing
supply chain issues in Aerospace. In 2023, working capital increased as a
percentage of sales by 120 basis points to 16.7% (2022 - 15.5%). We are
likely to see an increase in working capital over the coming year to support
the growth anticipated in Aerospace. Our medium term target remains for
working capital as a percentage of sales to reduce towards the 15% level.
Retirement benefit schemes
The retirement benefit surplus in respect of the Group's UK defined benefit
pension plan ("the UK Plan") decreased by £3.3m to £48.5m (31 December 2022
- £51.8m) due to £5.0m net actuarial losses and £0.8m running costs partly
offset by £2.5m net interest income. Retirement benefit deficits in respect
of the US and other territories decreased by £4.1m to £8.0m (31 December
2022 - £12.1m). During 2023, one of the US defined benefit plans was
settled following a combination of lump sum payments and annuity purchase. A
net expense of £nil and cash outflow of £0.9m was recorded in 2023 in
relation to this settlement.
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). 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 2024 in the US
funded plans is £0.9m (£0.9m was paid in 2023, excluding the contribution
related to the US pension settlement).
Net debt
Net debt which includes IFRS 16 lease liabilities increased by £24.9m to
£203.8m at 31 December 2023 (31 December 2022 - £178.9m). As noted in the
cash flow above, the Group generated net cash outflow of £25.5m (as defined
in Note 12c), after £8.5m favourable foreign currency movements and £7.9m
non-cash changes in lease liabilities due to additions and modifications.
Net debt excluding IFRS 16 lease liabilities of £71.8m (31 December 2022 -
£78.4m) increased by £31.5m to £132.0m at 31 December 2023 (31 December
2022 - £100.5m), due to free cash inflow of £15.5m and £4.2m favourable
foreign currency movements being more than offset by £25.8m cash outflow in
respect of corporate undertakings, £10.2m capital repayment of leases and
£15.2m net cash outflows for dividends, purchase of shares, restructuring and
US pension settlement.
Funding and Liquidity
As at 31 December 2023, the Group's gross borrowings excluding leases and
transaction costs directly attributable to borrowings were £181.0m (31
December 2022 - £145.3m), with 61% of the Group's gross borrowings
denominated in US Dollars (31 December 2022 - 64%). Cash and bank balances
were £47.6m (31 December 2022 - £43.2m).
The maturity of these borrowings, together with the maturity of the Group's
committed facilities, can be analysed as follows:
Gross (2) Committed
borrowings
facilities
£m £m
Within one year 1.8 -
In the second year 78.1 111.5
In years three to five 101.1 162.9
After five years - -
181.0 274.4
( )
(2) Gross borrowings include other loans and committed facilities, but exclude
leases of £71.8m and transaction costs directly attributable to borrowings of
£(1.4)m.
At the year-end, the Group had committed facilities of £274.4m comprising
private placement debt of £122.2m and revolving credit facilities of
£152.2m. The Group is in a strong funding position, with headroom at 31
December 2023 of £142.4m in cash and undrawn facilities.
During the second half of 2023, the Group extended the maturity of the
sustainability linked UK revolving credit facility to November 2027 with a
continued commitment of £115m. New private placement loan notes of $50m
(£39.4m) were issued and drawn down in February 2024. These notes carry an
interest rate of 6.26% and are due for repayment in February 2030.
The weighted average maturity of the Group's committed facilities at 31
December 2023 was 2.9 years. The current weighted average maturity of the
Group's facilities, updated for the February 2024 loan notes of $50m, is 3.2
years.
The Group has £1.8m (2022 - £0.5m) 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) must not exceed 3.0x and interest cover, the
ratio of EBITDA to interest must be higher than 3.5x. At 31 December 2023,
the Group's net debt to EBITDA was 1.6x and interest cover was 12.6x, both
comfortably within covenant limits.
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 78 of the Annual Report & Accounts 2023.
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 62 to 69 of the Annual Report &
Accounts 2023.
Risks and uncertainties
The principal risks and uncertainties faced by the Group are set out in detail
on pages 62 to 69 of the Annual Report & Accounts 2023.
Responsibility statement of the Directors in respect of the Annual Report
& Accounts 2023
We confirm that to the best of our knowledge:
1. the Financial Statements, as included in the Annual Report & Accounts
2023, 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 2023,
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.
By Order of the Board
David Squires Bindi Foyle
Group Chief Executive Officer Group Finance Director
1 March 2024 1 March 2024
Consolidated Income Statement
For the year ended 31 December 2023
Notes Year ended Year ended
2023
2022
£m £m
Revenue 3 963.5 848.4
Trading profit 36.9 32.1
Share of joint venture profit 9 1.0 0.4
Operating profit ((1)) 3 37.9 32.5
Finance income 10.1 1.9
Finance costs (20.5) (10.6)
Corporate undertakings 4 (4.7) (1.4)
Profit before tax ((2)) 22.8 22.4
Tax credit/(charge) 5 8.3 (2.2)
Profit for the period 31.1 20.2
Attributable to:
Equity holders of the parent 31.1 20.2
Earnings per share
Basic ((3)) 7 7.52p 4.86p
Diluted ((4)) 7 7.32p 4.73p
((1)) Adjusted operating profit 4 45.8 28.5
((2)) Adjusted profit/(loss) before tax 4 38.3 20.1
((3)) Adjusted earnings per share 7 10.28p 4.36p
((4)) Adjusted and diluted earnings per share 7 10.00p 4.24p
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Year ended Year ended
2023
2022
£m £m
Profit for the period 31.1 20.2
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Gains/(losses) on foreign exchange contracts - cash flow hedges during the 2.7 (4.5)
period
Reclassification adjustments for losses included in profit 0.9 2.2
Gains/(losses) on foreign exchange contracts - cash flow hedges 3.6 (2.3)
Exchange differences on translation of overseas operations (16.9) 24.5
Tax relating to items that may be reclassified (0.9) 0.7
(14.2) 22.9
Items that will not be reclassified subsequently to profit or loss:
Actuarial losses on defined benefit pension schemes (2.6) (23.1)
Tax relating to items that will not be reclassified 0.6 5.7
(2.0) (17.4)
Other comprehensive income for the period, net of tax (16.2) 5.5
Total comprehensive income for the period 14.9 25.7
Attributable to:
Equity holders of the parent 14.9 25.7
Consolidated Balance Sheet
As at 31 December 2023
Notes Year ended Year ended
2023
2022
£m £m
Non-current assets
Goodwill 8 193.3 199.7
Other intangible assets 33.1 36.2
Investment in joint venture 9 5.1 4.4
Property, plant and equipment 10 284.7 307.2
Deferred tax assets 20.7 10.9
Retirement benefits 13 48.5 51.8
Trade and other receivables 0.8 0.4
Total non-current assets 586.2 610.6
Current assets
Inventories 207.5 194.3
Current tax receivables 2.3 2.1
Trade and other receivables 141.7 126.7
Cash and bank balances 12c) 47.6 43.2
Total current assets 399.1 366.3
Total assets 985.3 976.9
Current liabilities
Trade and other payables 188.4 191.2
Current tax liabilities 10.0 17.7
Lease liabilities 12.4 12.7
Bank overdrafts and loans 12c) 1.8 0.5
Provisions 10.5 16.7
Contingent/deferred consideration 10.5 23.4
Total current liabilities 233.6 262.2
Non-current liabilities
Bank and other loans 12c) 177.8 143.2
Retirement benefits 13 8.0 12.1
Deferred tax liabilities 7.0 4.7
Lease liabilities 59.4 65.7
Provisions 15.0 2.9
Contingent consideration 18.5 28.9
Others 8.9 7.8
Total non-current liabilities 294.6 265.3
Total liabilities 528.2 527.5
Net assets 457.1 449.4
Equity
Issued share capital 11 41.9 41.9
Share premium account 14.8 14.8
Equity reserve 7.9 6.4
Hedging and translation reserve 37.3 51.5
Retained earnings 368.0 346.5
Own shares (12.8) (11.7)
Equity attributable to equity holders of the parent 457.1 449.4
Total equity 457.1 449.4
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
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 2022 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 gains on defined benefit pension schemes - - - - - (23.1) - (23.1)
Tax relating to components of other comprehensive income - - - 0.7 - 5.7 - 6.4
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
Profit for the year 2023 - - - - - 31.1 - 31.1
Gains on foreign exchange contracts - cash flow hedges - - - 3.6 - - - 3.6
Exchange differences on translation of overseas operations - - - - (16.9) - - (16.9)
Actuarial losses on defined benefit pension schemes - - - - - (2.6) - (2.6)
Tax relating to components of other - - - (0.9) - 0.6 - (0.3)
comprehensive income
Total comprehensive income/(expense) for the period - - - 2.7 (16.9) 29.1 - 14.9
Share-based payment charge - - 4.1 - - - - 4.1
Tax relating to share-based payments - - - - - 0.9 - 0.9
Purchase of shares held by employee benefit trust - - - - - - (5.6) (5.6)
Use of shares held by employee benefit trust - - - - - (4.5) 4.5 -
Transfer to retained earnings - - (2.6) - - 2.6 - -
Dividends paid - - - - - (6.6) - (6.6)
Balance at 31 December 2023 41.9 14.8 7.9 (36.1) 73.4 368.0 (12.8) 457.1
Consolidated Cash Flow Statement
For the year ended 31 December 2023
Notes Year ended Year ended
2023
2022
£m
£m
Net cash from operating activities 12a) 41.4 57.7
Investing activities
Interest received 4.3 0.7
Proceeds on disposal of property, plant and equipment 0.7 0.5
Purchases of property, plant and equipment (33.7) (28.7)
Purchases of intangible assets (2.2) (1.8)
Acquisition of Spencer 14 (23.9) (25.3)
Net cash used in investing activities (54.8) (54.6)
Financing activities
Dividends paid (6.6) (1.2)
New loans 136.2 90.8
Repayment of borrowings (96.2) (90.4)
Purchase of shares held by employee benefit trust (5.6) (4.5)
Repayment of lease liabilities (10.2) (9.1)
Net cash generated/(used) in financing activities 17.6 (14.4)
Net increase/(decrease) in cash and cash equivalents 4.2 (11.3)
Cash and cash equivalents at beginning of period 42.7 51.1
Effect of foreign exchange rate changes (1.1) 2.9
Cash and cash equivalents at end of period 12c) 45.8 42.7
Notes to the above Financial Statements
For the year ended 31 December 2023
1. General information
These results for the year ended 31 December 2023 are an excerpt from the
Annual Report & Accounts 2023 and do not constitute the Group's statutory
accounts for 2023 or 2022. Statutory accounts for 2022 have been delivered
to the Registrar of Companies, and those for 2023 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 2023 which is available online at
www.seniorplc.com. Printed copies will be distributed on or soon after 15
March 2024.
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 2023.
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
2023
2023
2023
2023
2022
2022
2022
2022
£m
£m
£m
£m
£m
£m
£m
£m
External revenue 615.7 347.8 - 963.5 553.0 295.4 - 848.4
Inter-segment revenue 0.8 0.2 (1.0) - 0.6 0.2 (0.8) -
Total revenue 616.5 348.0 (1.0) 963.5 553.6 295.6 (0.8) 848.4
Adjusted trading profit 27.0 37.5 (19.7) 44.8 20.3 25.4 (17.6) 28.1
Share of joint venture profit - 1.0 - 1.0 - 0.4 - 0.4
Adjusted operating profit (Note 4) 27.0 38.5 (19.7) 45.8 20.3 25.8 (17.6) 28.5
Amortisation of intangible assets from acquisitions (2.2) - - (2.2) (0.2) - - (0.2)
Net restructuring (cost)/income (Note 4) (3.6) (2.0) - (5.6) 4.2 - - 4.2
Site relocation costs - (0.1) - (0.1) - - - -
Operating profit 21.2 36.4 (19.7) 37.9 24.3 25.8 (17.6) 32.5
Finance income 10.1 1.9
Finance costs (20.5) (10.6)
Corporate undertakings (4.7) (1.4)
Profit before tax 22.8 22.4
Tax credit/(charge) (Note 5) 8.3 (2.2)
Profit after tax 31.1 20.2
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
2023
2022
£m
£m
Aerospace 646.5 647.8
Flexonics 215.4 217.3
Segment assets for reportable segments 861.9 865.1
Unallocated
Central 4.0 3.6
Cash 47.6 43.2
Deferred and current tax 23.0 13.0
Retirement benefits 48.5 51.8
Others 0.3 0.2
Total assets per Consolidated Balance Sheet 985.3 976.9
Liabilities Year ended Year ended
2023
2022
£m
£m
Aerospace 183.1 189.5
Flexonics 79.9 79.7
Segment liabilities for reportable segments 263.0 269.2
Unallocated
Central 22.2 19.2
Loans and Overdrafts 179.6 143.7
Deferred and current tax 17.0 22.4
Retirement benefits 8.0 12.1
Deferred/contingent consideration 29.0 52.3
Others 9.4 8.6
Total liabilities per Consolidated Balance Sheet 528.2 527.5
Total revenue is disaggregated by market sectors as follows:
Year Year
ended
ended
2023
2022
£m £m
Civil Aerospace 410.5 339.4
Defence 132.6 122.1
Other 73.4 92.1
Aerospace 616.5 553.6
Land Vehicle 201.7 164.1
Power & Energy 146.3 131.5
Flexonics 348.0 295.6
Eliminations (1.0) (0.8)
Total revenue 963.5 848.4
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 before tax
The presentation of adjusted operating profit and adjusted profit before tax
measures, derived in accordance with the table below, has been included to
identify the performance of the Group prior to the impact of amortisation of
intangible assets from acquisitions, net restructuring cost/income, site
relocation costs, and costs associated with corporate undertakings. The
Board has a policy, which has been clarified in 2023, to separately disclose
items it considers are outside the normal course of management oversight and
control on a day-to-day basis and are not reflective of in-year trading
performance. Indicative criteria such as period to which the item relates
and external driven factors that are outside of the control of the Group in
combination with the magnitude and consistency of application are also
considered.
The amortisation charge relates to the 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 into 2022 in response to the impact of the COVID-19 pandemic
on some of the Group's end markets. In 2023, some residual restructuring
activity took place in response to further specific end market conditions.
Site relocation costs relate to transfer of business activities into new or
existing cost competitive facilities to support the Group's strategic
initiatives. Corporate undertakings relate to business acquisition and
disposal activities. In the prior year, the aerospace manufacturing grant
within net restructuring income, represents incentives specific to only part
of the Group for a limited time period. 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
2023
2022
£m
£m
Operating profit 37.9 32.5
Amortisation of intangible assets from acquisitions 2.2 0.2
Net restructuring cost/(income) 5.6 (4.2)
Site relocation costs 0.1 -
Adjusted operating profit 45.8 28.5
Profit before tax 22.8 22.4
Adjustments to profit before tax as above 7.9 (4.0)
Corporate undertakings 4.7 1.4
Corporate undertakings - Interest 2.9 0.3
Total Corporate undertakings 7.6 1.7
Adjusted profit before tax 38.3 20.1
Net restructuring cost/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
2023, some residual restructuring activity took place in response to further
specific end market conditions affecting some of the businesses. 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.
The restructuring resulted in net cost of £5.6m (2022 - net income £4.2m; of
which £4.0m related to an aerospace manufacturing grant). Of this, £2.4m
related to consultancy and other costs (2022 - £1.2m net charge). For
certain specific programmes, and in conjunction with the continued focus on
restructuring, management also identified further inventory impairment of
£2.0m where customer demand decreased (2022 - £2.7m reversal reflected
separate and specific demand increase), and impairment provisions on property,
plant and equipment of £1.2m (2022 - £1.3m) to cover the risk where there
are no alternative uses.
Net cash outflow related to restructuring activities was £2.1m (2022 - £2.1m
net cash inflow). At 31 December 2023, a restructuring provision of £0.5m
(31 December 2022 - £0.2m) was recognised and is expected to be utilised in
2024.
Site relocation costs
In 2023, £0.1m of site relocation costs have been incurred related to the
initial costs of transferring our Senior Flexonics Crumlin business to a
nearby high-tech facility in Wales to better showcase its design, development,
test and qualification capabilities in support of the Group's strategic
initiatives.
Corporate undertakings
Costs associated with corporate undertakings were £7.6m (2022 - £1.7m), of
which £1.5m acquisition costs (2022 - £1.2m) and £2.9m interest unwind of
deferred and contingent consideration (2022 - £0.3m) relate to the
acquisition of Spencer Aerospace in November 2022 and £3.2m costs are
associated with potential disposal and other corporate activities (2022 -
£0.2m). See Note 14 for further details on the financial impact of the
acquisition in 2023.
5. Tax charge
Year ended Year ended
2023
2022
£m
£m
Current tax:
Current year 10.7 8.2
Adjustments in respect of prior periods- Americas uncertain tax positions (7.0) -
Adjustments in respect of prior periods- other (4.3) (1.9)
(0.6) 6.3
Deferred tax:
Current year (5.8) (3.5)
Adjustments in respect of prior periods (1.9) (0.6)
(7.7) (4.1)
Total tax (credit)/charge (8.3) 2.2
The adjusted tax rate for the year was 11.0% credit (2022 - 10.0% charge),
being a tax credit of £4.2m (2022 - £2.0m charge) on adjusted profit before
tax of £38.3m (2022 - £20.1m profit). The adjusted tax rate benefitted
from a release of £7.0m of provision for uncertain tax positions in the
second half of 2023 as described below. The adjusted tax rate also
benefitted from enhanced R&D deductions in the US, the UK Super-deduction
for capital expenditure and the geographical mix of taxable profits.
On 27th November 2023, the Group implemented a series of steps to simplify the
legal ownership of its Americas legal entity holding structure. As part of
the exercise, provisions held for estimated uncertain tax positions around the
historical establishment of the Americas legal structure were reassessed. As
a result, in accordance with IAS 12 and IFRIC 23 (Uncertainty over Income Tax
Treatments), provisions for the uncertain tax positions of £7.0m and
associated interest of £3.5m have been released to the consolidated income
statement during the year.
The reported tax rate was 36.4% credit, being a tax credit of £8.3m on
reported profit before tax of £22.8m. This included £4.1m net tax credit
on items excluded from adjusted profit before tax. The 2022 reported tax
rate was 9.8% charge, being a tax charge of £2.2m on reported profit before
tax of £22.4m.
Cash tax paid was £5.6m (2022 - £3.5m) and is stated net of refunds received
of £2.8m (2022 - £1.1m) of tax paid in prior periods, arising from the
offset of tax losses against taxable profits of prior periods.
6. Dividends
Year ended Year ended
2023
2022
£m
£m
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2022 of 1.00p per share (2021 - 4.1 -
£nil)
Interim dividend for the year ended 31 December 2023 of 0.60p per share (2022 2.5 1.2
- 0.30p)
6.6 1.2
Proposed final dividend for the year ended 31 December 2023 of 1.70p per share 7.0 4.1
(2022 - 1.00p)
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
2023
2022
million
million
Weighted average number of ordinary shares for the purposes of basic earnings 413.3 415.3
per share
Effect of dilutive potential ordinary shares:
Share options 11.7 11.6
Weighted average number of ordinary shares for the purposes of diluted 425.0 426.9
earnings per share
Year ended 2023 Year ended 2022
Earnings and earnings per share Earnings EPS Earnings EPS
£m
pence
£m
pence
Profit for the period 31.1 7.52 20.2 4.86
Adjust:
Amortisation of intangible assets from acquisitions net of tax of £0.6m (2022 1.6 0.39 0.2 0.05
- £nil)
Net restructuring cost/(income) net of tax of £1.5m (2022 - £0.7m) 4.1 0.99 (3.5) (0.84)
Site relocation costs net of tax of £0.1m (2022 - £nil) - - - -
Corporate undertakings net of tax of £1.9m (2022 - £0.5m) 5.7 1.38 1.2 0.29
Adjusted earnings after tax 42.5 10.28 18.1 4.36
Earnings per share
- basic 7.52p 4.86p
- diluted 7.32p 4.73p
- adjusted 10.28p 4.36p
- adjusted and diluted 10.00p 4.24p
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 cost/income, site relocation costs, and costs associated
with corporate undertakings.
The Board has a policy, which has been clarified in 2023, to separately
disclose items it considers are outside the normal course of management
oversight and control on a day-to-day basis and are not reflective of in-year
trading performance. Indicative criteria such as period to which the item
relates and external driven factors that are outside of the control of the
Group in combination with the magnitude and consistency of application are
also considered. See Note 4 for further details.
8. Goodwill
Goodwill decreased by £6.4m during the year to £193.3m (2022 - £199.7m) due
to net foreign exchange differences.
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 £5.1m represents the Group's share of the joint
venture's net assets as at 31 December 2023 (2022 - £4.4m).
10. Property, plant and equipment
During the period, the Group spent £33.7m (2022 - £28.7m) on the acquisition
of property, plant and equipment. The Group also disposed of property, plant
and equipment with a carrying value of £0.5m (2022 - £0.4m) for proceeds of
£0.7m (2022 - £0.5m). At 31 December 2023, right-of-use assets were
£64.4m (2022 - £70.8m).
11. Share capital
Share capital as at 31 December 2023 amounted to £41.9m. No shares were
issued during 2022 and 2023.
12. Notes to the Consolidated Cash Flow statement
a) Reconciliation of operating profit to net cash from operating activities
Year ended Year ended
2023
2022
£m
£m
Operating profit 37.9 32.5
Adjustments for:
Depreciation of property, plant and equipment 48.0 48.1
Amortisation of intangible assets 3.7 1.7
Profit on sale of fixed assets (0.2) (0.1)
Share-based payment charges 4.1 4.3
Pension contributions (1.4) (2.9)
Pension service and running costs 1.3 1.5
Corporate undertaking costs (1.9) (1.4)
Share of joint venture (1.0) (0.4)
Increase in inventories (21.7) (34.2)
Increase in receivables (20.4) (18.8)
Increase in payables and provisions 16.8 37.5
Restructuring impairment of property, plant and equipment and software 1.2 1.3
US pension settlement (0.9) -
Working capital and provisions currency movements (1.3) 1.8
Cash generated by operations 64.2 70.9
Income taxes paid (5.6) (3.5)
Interest paid (17.2) (9.7)
Net cash from operating activities 41.4 57.7
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
2023
2022
£m
£m
Net cash from operating activities 41.4 57.7
Corporate undertaking costs 1.9 1.4
Net restructuring cash paid/(received) 2.1 (2.1)
Site relocation costs 0.1 -
US pension settlement cash paid 0.9 -
Interest received 4.3 0.7
Proceeds on disposal of property, plant and equipment 0.7 0.5
Purchases of property, plant and equipment (33.7) (28.7)
Purchases of intangible assets (2.2) (1.8)
Free cash flow 15.5 27.7
c) Analysis of net debt
At 1 Net Exchange Other At 31
January
cashflow
movement
movements((1))
December
2023
2023
£m £m £m £m £m
Cash and bank balances 43.2 5.5 (1.1) - 47.6
Overdrafts (0.5) (1.3) - - (1.8)
Cash and cash equivalents 42.7 4.2 (1.1) - 45.8
Debt due within one year - - - - -
Debt due after one year (143.2) (39.9) 5.3 - (177.8)
Lease Liabilities((1)) (78.4) 10.2 4.3 (7.9) (71.8)
Liabilities arising from financing activities (221.6) (29.7) 9.6 (7.9) (249.6)
Total (178.9) (25.5) 8.5 (7.9) (203.8)
((1)) The change in lease liabilities in the year ended 31 December 2023 includes
lease rental payments of £13.1m (£2.9m of these payments relates to lease
interest), £4.3m exchange movement and £7.9m other movements which are
related to lease additions and modifications.
Year ended Year ended
2023
2022
£m
£m
Cash and cash equivalents comprise:
Cash and bank balances 47.6 43.2
Overdrafts (1.8) (0.5)
Total 45.8 42.7
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
2023
2022
£m
£m
Inventories 207.5 194.3
Trade and other receivables 141.7 126.7
Trade and other payables (188.4) (191.2)
Working capital, including derivatives 160.8 129.8
Items excluded:
Foreign exchange contracts 0.1 1.5
Total 160.9 131.3
Working capital and provisions movement, net of restructuring items, a
non-statutory cash flow item, is derived as follows:
Year ended Year ended
2023
2022
£m
£m
Increase in inventories (21.7) (34.2)
Increase in receivables (20.4) (18.8)
Increase in payables and provisions 16.8 37.5
Working capital and provisions movement, excluding currency effects (25.3) (15.5)
Items excluded:
(Increase)/decrease in restructuring related inventory impairment (2.0) 2.7
(Increase)/decrease in net restructuring provision and other receivables (0.3) 0.7
Total (27.6) (12.1)
13. Retirement benefit schemes
At 31 December 2023, aggregate retirement benefit liabilities of £8.0m (2022
- £12.1m) comprise the Group's US defined benefit pension funded schemes with
a total deficit of £2.8m (2022 - £6.7m) and other unfunded schemes, with a
deficit of £5.2m (2022 - £5.4m). The retirement benefit surplus of £48.5m
(2022 - £51.8m) 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.
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 (£24.2m) was paid in November 2023.
Additionally, there is contingent consideration of $40m (£29.0m)
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 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 after market
customers around the world to exploit opportunities for Spencer Aerospace.
In 2023, £1.5m costs (2022 - £1.2m) were incurred related to the
acquisition. The movement of deferred and contingent consideration payable
and working capital receivable since acquisition date is shown below:
Year ended Year ended
2023
2022
£m
£m
Balance at 1 January 52.0 -
Consideration payable on acquisition - 76.9
Cash paid net of working capital received/paid (23.9) (25.3)
Interest unwind charged to the Income Statement 2.9 0.3
Effects of movements in exchange rates (2.0) 0.1
Balance at 31 December 29.0 52.0
Amounts falling due within one year 10.5 23.4
Amounts falling due after one year 18.5 28.9
Deferred and contingent consideration at 31 December 29.0 52.3
Working capital receivable at 31 December - (0.3)
Also in 2023, £3.2m costs associated with potential disposal and other
corporate activities were incurred (2022 - £0.2m).
15. Provisions
Provisions include warranty costs of £17.9m (2022 - £10.8m), restructuring
of £0.5m (2022 - £0.2m), and other provisions including contractual matters,
claims and legal costs that arise in the ordinary course of business of £7.1m
(2022 - £8.6m). The warranty costs include a provision of £11.0m related
to one specific disputed commercial matter. In 2022, this provision was
£8.6m, of which £4.8m was recorded in Legal claims and contractual matters
and subsequently reclassified to warranty in 2023 following a review of the
overall nature of the matter. The range of reasonably possible outcomes
considered by the Board is £5.4m, which reflects a reasonably possible
increase or decrease of £2.7m. No further details on the matter are
disclosed to avoid prejudicing the contractual position.
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 2023 (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
Barbara Jeremiah, Senior Independent non-executive Director and Chair of the
Remuneration Committee, was appointed a non-executive director of Johnson
Matthey Plc with effect from 1 July 2023. Johnson Matthey Plc, a related
party of the Group, has been renting excess car parking space from one of the
Group's operating businesses on a rolling monthly basis. The lease contract
was in place prior to the acquisition of Thermal Engineering in 2013 by the
Group. In 2023, £0.06m car park rental was received (2022: £0.06m).
There are no outstanding amounts at 31 December 2023 (31 December 2022:
£nil).
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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