|2012(£m)||2011(£m)||Reported growth||Underlying growth|
|Headline operating profit||38||28||38%||36%|
|Headline operating margin||16.3%||12.5%|
|Statutory operating profit||||26|
|Return on capital employed||28.4%||21.9%|
Flex-Tek’s reported revenue grew 6%, or £12m, driven by an underlying increase of £10m (5%) and a £2m gain from currency translation. The improvement was generated by revenue growth from aerospace components and sales to the US residential construction market. This was partially offset by weakness in the household appliance sector of our heating element business.
Headline operating margin rose 380 basis points to 16.3% as a result of the increased volumes and associated operational gearing and positive mix from the faster growing aerospace sales. The underlying increase in operating profit of £10m stemmed from higher volumes, pricing and the benefits of our cost-saving initiatives. There was also a £5m gain from the change in accounting treatment for the legal defence costs associated with the flexible gas piping business. In previous years these costs had been charged to headline operating profit but are now being treated as an exceptional item (see notes 4 and 22 to the accounts). Excluding this change in accounting treatment, the underlying headline operating profit rose 18%.
As announced at the half year, a provision has been established in these accounts to resolve future claims, resulting in a charge of £55m, leading to a statutory operating loss of £17m.
Return on capital employed rose 650 basis points on the back of the improved profitability.