preliminary results year ended 31 march 2004. preliminary results - 2003/04 laying the foundations...

Preliminary Results Year Ended 31 March 2004

Preliminary Results - 2003/04Preliminary Results - 2003/04

Laying the foundations for Growth & Laying the foundations for Growth & Change…Change…

HighlightsHighlights

20042004£m£m

20032003£m£m

Sales*Sales* 68.668.6 74.174.1

Operating Profit*Operating Profit* 3.23.2 4.54.5

Profit Before Tax*Profit Before Tax* 1.61.6 2.9 2.9

Cash inflow from operating activitiesCash inflow from operating activities 5.55.5 4.24.2

Net Debt – pre pref redemptionNet Debt – pre pref redemption 19.119.1 19.719.7

Net Debt – post pref redemptionNet Debt – post pref redemption 24.724.7 19.719.7

* Continuing operations, before goodwill amortisation and exceptional items

Key Issues – AerospaceKey Issues – Aerospace

Record Eclipse contract secured (USD 380m)Record Eclipse contract secured (USD 380m)

New business from MTU, Snecma & GoodrichNew business from MTU, Snecma & Goodrich

Improved competitiveness now bearing fruitImproved competitiveness now bearing fruit

Unprecedented current quote activityUnprecedented current quote activity

Low cost sourcing plans gaining momentumLow cost sourcing plans gaining momentum

Targeting further significant opportunitiesTargeting further significant opportunities

Key Issues – AerospaceKey Issues – AerospaceRecord Eclipse contract secured…Record Eclipse contract secured…

Positive leading indicators of cyclical recovery now apparent (calendar 2004 should be low point)

Airline profitability improving (Q4 2003)

Airbus relatively bullish

Overall, improved customer/industry sentiment (particularly Biz jets)

BUT; volatility & price pressure expected to remain a feature in 2004/05; AND

Caution over potential impact of oil price rise?

Aerospace - Market OutlookAerospace - Market OutlookGeneralGeneral

Key Issues – Precision AutomotiveKey Issues – Precision Automotive

Continuing strong demand, as Continuing strong demand, as projected. Sales up 14% in 2003/04projected. Sales up 14% in 2003/04

S&W penetration increasing; S&W penetration increasing; capacity expansion proceeding to capacity expansion proceeding to plan. Automatic balancing cell plan. Automatic balancing cell commissionedcommissioned

Low costs sourcing integration plans Low costs sourcing integration plans well progressed. Discussions with well progressed. Discussions with potential partners on-goingpotential partners on-going

Major new customer secured Major new customer secured (Bosch), & targeting Hitachi(Bosch), & targeting Hitachi

Positive outlook for continuing strong Positive outlook for continuing strong growth…growth…

Key Issues – Precision AutomotiveKey Issues – Precision Automotive

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2

4

6

8

10

12

14

16

18

20

Ms

2000 2002 2004 2006 2008

Europe Americas Japan Asia Heavy (global)

• Strong growth in turbocharger penetration expected to continue, driven by tightening fuel emission regulations

Patchy glass demand in 2003/04 Patchy glass demand in 2003/04 (OEM consolidation activity)(OEM consolidation activity)

Patent applications in preparation Patent applications in preparation for new, higher performance for new, higher performance products, following successful products, following successful trialstrials

Strategic relationship with major Strategic relationship with major customer continues to developcustomer continues to develop

Key Issues – Precision IndustrialKey Issues – Precision Industrial

Reason for the Equity FundingReason for the Equity Funding

1. Attractive growth opportunities in Precision Automotive

2. Execution of Low Cost Sourcing strategy

3. Funding Eclipse

4. Constraint of existing debt levels – customer perceptions

Equity Funding - UpdateEquity Funding - Update

UsesUses £m£m UpdateUpdate

Precision Auto capacity growthPrecision Auto capacity growth 5.05.0 Investment on-going (£1.9m in Investment on-going (£1.9m in 2003/04)2003/04)

Low Cost Sourcing investmentLow Cost Sourcing investment 5.05.0 JV discussions & Indian JV discussions & Indian Greenfield feasibility study in Greenfield feasibility study in progressprogress

Eclipse investment fundingEclipse investment funding 4.04.0 Pre production activity running Pre production activity running wellwell

Less: expensesLess: expenses (0.6)(0.6)

TotalTotal 13.413.4

Summary Summary

Results in line with expectationsResults in line with expectations

Major strategic contracts secured. More in cross-hairsMajor strategic contracts secured. More in cross-hairs

Low cost strategy moving forward. Significant opportunities Low cost strategy moving forward. Significant opportunities visible (outsourcing & new programmes)visible (outsourcing & new programmes)

Cost base further reduced in 2003/04Cost base further reduced in 2003/04

Civil aerospace demand showing faltering steps towards Civil aerospace demand showing faltering steps towards recovery. Oil prices may have dampening effectrecovery. Oil prices may have dampening effect

Precision Automotive following strong growth curvePrecision Automotive following strong growth curve

Board strengthened Board strengthened

Funding successfully closed. Investment plans taking shapeFunding successfully closed. Investment plans taking shape

Preliminary Results Year Ended 31 March 2004

HighlightsHighlights

20042004£m£m

20032003£m£m

Sales*Sales* 68.668.6 74.174.1

Operating Profit*Operating Profit* 3.23.2 4.54.5

Profit Before Tax*Profit Before Tax* 1.61.6 2.9 2.9

Cash inflow from operating activitiesCash inflow from operating activities 5.55.5 4.24.2

Net Debt – pre pref redemptionNet Debt – pre pref redemption 19.119.1 19.719.7

Net Debt – post pref redemptionNet Debt – post pref redemption 24.724.7 19.719.7

* Continuing operations, before goodwill amortisation and exceptional items

Sales AnalysisSales Analysis

20042004£m£m

20032003£m£m

AerospaceAerospace 45.445.4 51.951.9

Precision EngineeringPrecision Engineering 23.223.2 22.222.2

TotalTotal 68.668.6 74.174.1

Profit & Loss AccountProfit & Loss Account

20042004£m£m

20032003£m£m

Profit Before Tax*Profit Before Tax* 1.61.6 2.92.9

TaxTax (0.5)(0.5) (0.5)(0.5)

Profit After Tax*Profit After Tax* 1.11.1 2.42.4

Preference DividendPreference Dividend (0.2)(0.2) (0.4)(0.4)

Earnings*Earnings* 0.90.9 2.02.0

Earnings per Share*Earnings per Share* 0.8p0.8p 1.7p1.7p

* Continuing operations, before goodwill amortisation and exceptional items

Operating Free Cash FlowOperating Free Cash Flow

20042004£m£m

20032003£m£m

EBITDAEBITDA 6.96.9 8.38.3

ExceptionalsExceptionals (3.2)(3.2) (0.6)(0.6)

ProvisionsProvisions 0.50.5 (4.9)(4.9)

Working CapitalWorking Capital 1.31.3 1.31.3

OtherOther -- 0.10.1

Cash Flow from OperationsCash Flow from Operations 5.55.5 4.24.2

Cap-ex Cap-ex (2.6)(2.6) (4.0)(4.0)

DisposalsDisposals 0.10.1 4.14.1

TaxTax (0.4)(0.4) 0.30.3

Operating Free Cash FlowOperating Free Cash Flow 2.62.6 4.64.6

Capital ExpenditureCapital Expenditure

20042004£m£m

20032003£m£m

Capital ExpenditureCapital Expenditure 2.62.6 4.04.0

DepreciationDepreciation 3.73.7 4.04.0

As a % of DepreciationAs a % of Depreciation 69%69% 97%97%

Capital ExpenditureCapital Expenditure

20042004£m£m

20032003£m£m

Precision AutomotivePrecision Automotive 1.91.9 1.41.4

AerospaceAerospace 0.70.7 2.62.6

TotalTotal 2.62.6 4.04.0

Change in Net DebtChange in Net Debt

20042004£m£m

20032003£m£m

Operating Free Cash FlowOperating Free Cash Flow 2.62.6 4.64.6

Debt ServiceDebt Service (1.4)(1.4) (1.5)(1.5)

Preferred Equity ServicePreferred Equity Service (0.4)(0.4) (0.4)(0.4)

FX translationFX translation (0.1)(0.1) --

Change in Underlying Net DebtChange in Underlying Net Debt 0.70.7 2.72.7

Preference Shares RedeemedPreference Shares Redeemed (5.6)(5.6) (0.1)(0.1)

Change in Net DebtChange in Net Debt (5.0)(5.0) 2.62.6

Shareholders’ Funds & Net DebtShareholders’ Funds & Net Debt

20042004

£m£m

EquityEquityIssueIssue£m£m

ProProFormaForma

£m£m

20032003

£m£m

Net DebtNet Debt 24.724.7 (13.4)(13.4) 11.311.3 19.719.7

Shareholders’ FundsShareholders’ Funds

OrdinaryOrdinary 11.211.2 13.413.4 24.624.6 15.815.8

PreferencePreference -- -- -- 5.65.6

Total EquityTotal Equity 11.211.2 13.413.4 24.624.6 21.421.4

Net Debt/EquityNet Debt/Equity 220%220% 46%46% 92%92%

Equity Subscription & Rights IssueEquity Subscription & Rights Issue

Successful closure 14 May 2004Successful closure 14 May 2004 Acceptances for 88.5%Acceptances for 88.5% Rump placed at 2p premiumRump placed at 2p premium 4 new Institutional holders4 new Institutional holders Positive aerospace marketing stimulus – already bringing Positive aerospace marketing stimulus – already bringing

business development benefitsbusiness development benefits

SummarySummary

Aggressive cost base management continuesAggressive cost base management continues Continuing tight cash controlContinuing tight cash control Shareholder value management (“VBM”) driving Shareholder value management (“VBM”) driving

increased asset efficiencyincreased asset efficiency Strategic benefits from substantial deleveragingStrategic benefits from substantial deleveraging Increased liquidityIncreased liquidity Pump now primed for growth…Pump now primed for growth…

Preliminary Results - 2003/04Preliminary Results - 2003/04

Laying the foundations for Growth & Laying the foundations for Growth & Change…Change…

Preliminary Results Year Ended 31 March 2004