Final Results - Year Ended 31 December 1999

Roxboro Group PLC 13 March 2000 Contacts: Harry Tee - Group Chief Executive Alf Vaisey - Group Finance Director The Roxboro Group PLC Telephone: 01223 424626 Alistair Mackinnon-Musson Philip Dennis Square Mile Communications Telephone: 0171 601 1000 THE ROXBORO GROUP PLC Preliminary Results The Roxboro Group PLC, the Cambridge based controls technology group, is pleased to announce it's preliminary results for the year ended 31 December 1999. * Turnover up at £124.8m (1998: £114.2m) * Underlying operating profit* up at £19.2m (1998: £17.2m) * Underlying EPS* up at 22.5p (1998: 21.6p) * Operating cash flow up to £18.7m (1998: £16.7m) * Dividend up to 8.7p (1998: 8.0p) * 39% improvement in H2 pre-tax profits * Norwich and ISA acquisitions completed; Mobrey acquisition completed in January 2000 * Order book 34% up * before non-recurring costs and goodwill Harry Tee, Chief Executive said: 'The Group has produced a solid performance despite the weakness of the petrochemical sector. The strength of the communications market was a major factor in the growth of our US based electro-optics business, in addition to the very strong sales growth of their solid state traffic light products. The integration of Mobrey is progressing well following its acquisition in January.' Chairman and Chief Executive's Report Overall, the Roxboro Group produced a solid performance in 1999. We are particularly pleased with the Group's performance in the second half which showed a 39% pre-tax profit improvement over the first half and 22% up on the same period last year. Before non-recurring costs and goodwill, Group operating profit increased to £19.2 million (1998: £17.2m). Turnover increased to £124.8m (1998: £114.2m) while pre-tax profits before non-recurring costs and goodwill increased to £18.9m (1998: £17.5m). Underlying earnings per share improved to 22.5p (1998: 21.6p). The company also generated increased operating cashflow of £18.7m in the year. The Board is therefore recommending a final dividend of 5.9p, bringing the total dividend for the full year to 8.7p, an increase of 9% over 1998. These results provide a strong indication the Roxboro Growth Plan, based on shared knowledge, skills, facilities, people, resources and contacts, is continuing to achieve our defined goals. During the year the Group made a number of investments each of which will benefit the Group in the future. These include the acquisition of Norwich Aero Products and ISA Controls, and the purchase of the Farnborough site, on which Solartron and Weston are based. These investments, totaling £23.1m, together with an increased spend on capital equipment of £5.7m, resulted in year-end debt of £10.2m (1998: £11.9m net cash) At the year-end the Group order book was 34% higher than at the same period last year. Components Division (Comprising Dialight Corp and BLP Components) 1999 1998 Increase Turnover £52.6m £45.5m 15.6% Operating Profit £8.9m £7.5m 18.7% The Components Division recorded strong profitable growth during the year. Our United States business, Dialight, which addresses the communications and transportation markets, advanced significantly, securing important contracts in the fast-growing data communications field and strengthening its grip on the expanding United States market for solid state traffic lights. Likewise, BLP continued to build its position in the automotive and utilities sectors with contracts to supply its innovative switching devices. The components market strengthened progressively during 1999 and the division was able to achieve its fourth successive year of good growth, with a record order book by the year-end. Overall the division achieved an 19% growth in operating profits. Dialight's Transportation product group, which leads the emerging market for solid state traffic signals, made a good debut contribution to profits. The Components Division's performance is largely attributable to Dialight, which benefited from increased demand for its products in both its business groups. Dialight's Status Communications Group specialises in producing visual and electro-optical devices for the Information and Communications Technology (ICT) sector. Dialight's products are found in cellular telephony, computer networks, cable modems and other communications products, a market sector that enjoyed strong growth in 1999. Firm contracts are now in place with some of the leading companies in this sector, including Lucent, Cisco, 3Com, Nokia, Nortel and Microsoft, for whom Dialight is providing a key electro-optical component for their new IntelliEye mouse. After three years of investment, Dialight's other business group, Transportation Group, achieved a profit following another year of 40% growth in sales. This success is due to expanding sales of Dialight's solid state traffic light technology, for which there is now rising demand across the United States as individual states recognise the cost and reliability benefits of Dialight's products. Dialight LED traffic lights are now in use in 30 states, including California, New Jersey and New York. Since this product line was introduced in 1996 sales have grown to around $15million and continue to show excellent future potential. The fast pace of development in Light Emitting Diode (LED) technology is opening up new opportunities for solid state lighting techniques, including white light, across a wide range of applications. Dialight, as the clearly identified United States market leader in the application of LED technology, is well placed to capture a significant share of these developing markets. BLP, the UK-based manufacturer of customised electro- magnetic devices, had a difficult year, due to a combination of slow demand from UK industry and direct exports being depressed by the strength of Sterling. The company's product range is fundamentally strong however, and remains highly attractive to the utilities and automotive industries. Sensors Division (comprising Weston Aerospace, Norwich Aero Products Inc Pressure Systems Inc and Solartron Metrology) 1999 1998 Increase Turnover £48.3m £43.1m 12% Operating Profit £10.4m £9.3m 12% Following four years of continuous growth, the Sensors Division achieved another good performance in 1999 ending the year with a record order book. This outstanding performance is largely attributable to excellent operational improvements and continued buoyancy in the aerospace sector. The Sensors Division was strengthened at the beginning of the year with the acquisition of Norwich Aero Products, a US based supplier of temperature sensors for the aerospace industry. This important initiative provides the Group with additional and complementary product development and a manufacturing base in the world's largest aerospace market. In the future, this development is expected to produce excellent opportunities for our aerospace activities in the United States market. Weston, our primary aerospace business, continued to improve its operational performance through the application of highly effective management techniques aimed at improving service to customers. Weston has doubled in size over the past four years and transformed itself into the preferred supplier of temperature sensors to many of the world's engine manufacturers equipment producers and airlines. This status has enabled Weston to win an important order from Rolls-Royce to supply the entire suite of thermocouples and speed sensors for the new Trent 500 engines, due to reach production in 2001. The company has also signed an LTA (long term agreement) with TRW Aeronautical Systems Group to supply the pressure sensors for all their FADEC requirements including the Trent 500, 700 and 800 engines. Technological superiority has also enabled Weston to grow its share of the temperature measurement aftermarket, which is approximately five times as big as the Original Equipment Manufacturers sector. New customers in 1999 include KLM, Lufthansa and JAL. The aerospace industry, having been buoyant for the past four years, is predicted to level off during 2000. The combined presence of Weston and Norwich will, we believe, enable us to maintain our long term growth trend, both in the OEM and aftermarkets. Solartron Metrology also picked up after a relatively weak start to the year. The company is a clear world leader in the manufacture of gauging sensors for quality control systems throughout the engineering industries, where they are used to check the precise dimensions of manufactured parts. Margins and volumes improved over 1998, and the company further increased its market share. Pressure Systems Inc, had a disappointing year due to a slow down in sales to NASA. The new Quartzonic range of products grew well, however, and production is planned to expand further in the current year. Instrumentation Division (Comprising Solartron and ISA Controls) 1999 1998 Turnover £24.0m £25.6m Operating Profit £1.3m £2.6m The Instrumentation Division had a difficult year in a very depressed market, particularly in the first half. First half losses, however, including restructuring costs of £0.3m, were transformed into a second half profit of £1.7m, giving a full year result of £1.3m. At the year-end the total order book was virtually unchanged from the previous year. Solartron, whose business dominates the Instrumentation Division, designs and manufactures a range of transducers and instruments that are widely used throughout the petro- chemical industries to measure flow, density and viscosity. A new Managing Director was appointed at Solartron with a brief to restore the cost base to more competitive levels and develop a more cohesive forward strategy. We took the opportunity to restructure and re-focus the division, with the objective of reducing costs and broadening its proposition to the marketplace This led to the acquisition in June of ISA Controls Ltd, a UK manufacturer of specialist flow and temperature measurement products which adds considerable product strength to our offering into the oil and gas industry. The close parallels between the product ranges of ISA and Solartron have created significant opportunities for cost- effective cross-selling in the future. Mobrey In January, Roxboro acquired the seven companies that comprise the Mobrey Group, from Meggitt plc for £22.95 million cash consideration. The Mobrey Group manufacture level, pressure and flow instruments for use in process and energy applications, and increases the Instrumentation Division's product range, enhances its research and development capability, and broadens its channels to market. The integration of Solartron and Mobrey is well underway and will result in the combined cost base being reduced by no less than £3.5 million, some of which will benefit the group late in the current year. Restructuring and integration costs of £5.5 million will be incurred primarily in the first half of the current year. We anticipate the petrochemical sector will release previously postponed capital projects during the current year, and that the Instrumentation Division, now strengthened with the addition of ISA Controls and the Mobrey companies, will be able to capitalise on this revival although improvement is not anticipated until the second half at the earliest. Market Focus Over the past five years, Roxboro has grown both organically and through acquisition. The strategy has been designed to develop a group that is well balanced across three main markets, with each business focusing on growing niche market sectors. Roxboro has now developed to a point where our Group structure can be simplified significantly. To achieve the clarity we seek, we are planning to re- organise the Group into three business entities and focus our activities under three brands. This will also reflect a new management structure. This will be organised as follows: * The Solartron Group, comprising Solartron Mobrey, Solartron Metrology, Solartron Analytical and Solartron ISA, will be focused on the energy and process industries. The Managing Director of this group will be Allan Imrie who has managed Solartron for the past year, having spent his entire career in the Instrumentation market. * The Weston Group, comprising Weston Temperature Measurement, Weston Engine Accessories and Weston Pressure Systems, will address the aerospace sector for both airborne and ground test applications. Richard Wood, who has led Weston Aerospace for the past four years, will manage the Weston group. * The Dialight Group will comprise Dialight Electro- Optics, Dialight Transportation and BLP. The group will continue to address its key growth markets in communications, traffic signals, transportation and metering. Dialight will be led by Mike Kirchoff, who is based in the United States, and has been CEO of Dialight for the past two years. From what is currently eight separate companies, three strong, focussed groups will emerge led by three experienced managing directors and capitalising on three powerful industry brand names. The result of these changes will be a clearer alignment between the businesses and their target markets, and a Group structure that is more transparent and more meaningful both to customers and shareholder. Strategy Following the 1999 restructuring exercise in the Instrumentation Division, Roxboro is well positioned in all its markets. There is always room for further improvement in operational efficiency, however. The Kaizen and Six Sigma techniques, which have raised the performance of our operations so successfully in recent years, are being rolled out across our new acquisitions, with the objective of turning each of our companies into the preferred supplier in its own field. The Group's strategy remains focused on identifying growing niche sectors in our markets. Our primary markets are Communications and Transport through Dialight, Energy and Process through Solartron, and Aerospace through Weston. Within our chosen markets, we will continue to strive for outstanding results on behalf of our shareholders and customers alike. Outlook The trading outlook is positive. The data communications sector is experiencing rapid and sustained growth, creating further substantial new opportunities for our electro- optical components. In the transport sector, we anticipate healthy advances in the use of our solid-state lighting technology, particularly in the United States. The Asian economic revival has been sustained, and the buoyancy of the oil price is likely to trigger a growth in capital expenditure on previously delayed projects, from which we would expect the re-based Solartron Group to benefit. Following the acquisition of Mobrey, the anticipated integration costs of £5.5m will be incurred in the current year, largely in the first half. Some of the benefits of this restructuring will begin to flow through late in the year, with the full benefit in 2001. In view of the encouraging signs in our key markets and with a strong order book at the start of the year, the board remains confident of Roxboro's prospects. Sir Alan Cockshaw Harry Tee Chairman Chief Executive GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 December 1999 1999 1998 £'000 £'000 -------- -------- Turnover Continuing operations 118,402 114,233 Acquisitions 6,434 - -------- -------- 124,836 114,233 Cost of sales (78,091) (71,493) -------- -------- Gross profit 46,745 42,740 Distribution costs (16,786) (15,745) Administrative (10,726) (9,813) expenses Non-recurring (778) - operating costs Goodwill amortisation (274) - -------- -------- Operating profit Continuing operations 17,619 17,182 Acquisitions 562 - -------- -------- 18,181 17,182 Net interest (329) 273 (payable)/receivable -------- -------- Profit on ordinary activities before 17,852 17,455 taxation Tax on profit on ordinary activities (6,057) (5,204) -------- -------- Profit on ordinary activities after taxation 11,795 12,251 Minority interest - (135) -------- -------- Profit for the financial year attributable to members of the parent 11,795 12,116 company Dividends (4,901) (4,495) -------- -------- Retained profit for the financial year 6,894 7,621 -------- -------- Pence Pence Earnings per share - basic 20.9 21.6 - adjusted 22.5 21.6 - diluted 20.7 21.1 -------- -------- GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 December 1999 1999 1998 £'000 £'000 -------- -------- Profit for the year attributable to equity shareholders 11,795 12,116 Currency translation differences on foreign currency net investments 362 (42) -------- -------- Total gains recognised in the year 12,157 12,074 -------- -------- GROUP BALANCE SHEET at 31 December 1999 1999 1998 £'000 £'000 -------- -------- Fixed assets Intangible assets 6,572 - Tangible assets 32,561 15,030 Investments 39 39 -------- -------- 39,172 15,069 -------- -------- Current assets Stocks 13,770 10,692 Debtors 24,686 19,898 Cash at bank and in 4,531 15,125 hand -------- -------- 42,987 45,715 Creditors: Amounts falling due within one year Borrowings (13,966) (3,222) Other creditors (21,968) (19,545) -------- -------- (35,934) (22,767) Net current assets 7,053 22,948 -------- -------- Total assets less current liabilities 46,225 38,017 -------- -------- Creditors: Amounts falling due after more than one year Borrowings (771) (7) Provisions for liabilities and charges (741) (731) -------- -------- 44,713 37,279 Minority interests - (217) -------- -------- 44,713 37,062 -------- -------- Capital and reserves Called up share 563 562 capital Share premium account 4,893 4,590 Capital redemption 51 51 reserve Other reserves - - Profit and loss 39,206 31,859 account -------- -------- 44,713 37,062 -------- -------- GROUP STATEMENT OF CASH FLOWS for the year ended 31 December 1999 1999 1998 £'000 £'000 -------- -------- Cash flow from operating activities 18,714 16,680 Returns on investments and servicing of finance Interest paid (635) (461) Interest received 363 734 -------- -------- Net cash (outflow)/inflow from returns on investment and servicing of (272) 273 finance -------- -------- Taxation (7,234) (4,370) -------- -------- Capital expenditure and financial investment Purchase of tangible fixed assets (19,580) (3,948) Sale of tangible fixed 106 1,371 assets -------- -------- Net cash outflow from investing activities (19,474) (2,577) Acquisitions and disposals Purchase of subsidiary undertakings (7,342) - Sale of subsidiary (194) - undertaking -------- -------- (7,536) - Equity dividends paid (4,611) (4,213) -------- -------- Cash (outflow)/inflow before use of liquid resources and financing (20,413) 5,793 Financing Issue of ordinary 304 39 share capital Loan advance 13,500 - Loan repayments (3,801) (4,734) Capital element of finance lease rental payments (60) (34) -------- -------- 9,943 (4,729) -------- -------- (Decrease)/increase in cash in the year (10,470) 1,064 -------- -------- Reconciliation of net cash flow to movements in net debt (Decrease)/increase in cash in the year (10,470) 1,064 Cash outflow from decrease in debt and lease (9,639) 4,768 financing -------- -------- Change in net debt resulting from cash flows (20,109) 5,832 Loans and finance leases acquired with subsidiary undertakings (1,345) - Loan notes issued (590) - Translation difference (58) 12 -------- -------- Movement in net (debt)/cash in the year (22,102) 5,844 Net cash at beginning 11,896 6,052 of year -------- -------- Net (debt)/cash at end (10,206) 11,896 of year -------- -------- NOTES TO THE ACCOUNTS 1. Segmental information Turnover, operating profit and net assets are analysed below: 1999 1998 £'000 £'000 a) Turnover By geographical destination: UK 29,974 28,192 USA 65,334 58,050 Other European 15,896 15,876 countries Rest of the world 13,632 12,115 -------- -------- 124,836 114,233 -------- -------- By geographical origin: UK 66,882 65,988 USA 63,137 54,996 Other European 1,763 1,791 countries -------- -------- 131,782 122,775 Inter-segment sales (6,946) (8,542) -------- -------- 124,836 114,233 -------- -------- By Business operation: Components 52,608 45,538 Sensors 48,256 43,125 Instrumentation 23,972 25,570 -------- -------- 124,836 114,233 -------- -------- b) Operating profit 1999 1998 £'000 £'000 -------- -------- By geographical origin: UK 11,946 11,861 USA 8,814 7,675 Other European (152) (155) countries -------- -------- Operating profit before central costs and goodwill 20,608 19,381 amortisation Central costs (2,153) (2,199) Goodwill amortisation (274) - -------- -------- Operating profit on ordinary activities 18,181 17,182 -------- -------- By business operation: Components 8,904 7,548 Sensors 10,368 9,282 Instrumentation 1,336 2,551 -------- -------- Operating profit before central costs and goodwill 20,608 19,381 amortisation Central costs (2,153) (2,199) Goodwill amortisation (274) - -------- -------- Operating profit on ordinary activities 18,181 17,182 -------- -------- c) Net assets By geographical origin: UK 19,220 13,971 USA 11,862 9,251 Other European (99) - countries -------- -------- 30,983 23,222 Unallocated central 13,730 13,840 net assets -------- -------- 44,713 37,062 -------- -------- By business operation: Components 13,500 11,624 Sensors 12,651 6,170 Instrumentation 4,832 5,428 -------- -------- 30,983 23,222 Unallocated central 13,730 13,840 net assets -------- -------- 44,713 37,062 -------- -------- 1999 1998 2 Operating Profit £'000 £'000 -------- -------- a) Reconciliation of operating profit to net cash inflow from operating activities Operating profit 18,181 17,182 Depreciation charges 4,301 3,564 Goodwill amortisation 274 - Profit on sale of tangible fixed assets (26) (232) (Increase)/decrease in stocks (2,337) 91 Increase in debtors (3,084) (3,230) Increase/(decrease) in creditors 1,314 (718) Other non cash items 91 23 -------- -------- Net cash inflow from operating activities 18,714 16,680 -------- -------- b) Non-recurring costs £'000 Operating profit is stated after charging the following non-recurring costs: Aborted acquisition 189 costs Re-organisation costs 270 Costs in respect of a successful defence of a litigation case 319 -------- 778 -------- 3. The directors have proposed a final dividend of 5.9p (1998: 5.4p) which is subject to shareholder approval at the annual general meeting on 19 April 2000, and if approved will be payable on 25 April 2000 to shareholders on the register on 24 March 2000. 4. Earnings per Share The calculation of earnings per ordinary share is based on profit of £11,795,000 (1998: £12,116,000) and on 56,302,832 (1998: 56,175,075) ordinary shares, being the average number of ordinary shares in issue during the year. The diluted earnings per share is based on profit for the year of £11,795,000 (1998: £12,116,000), and on 57,015,007 (1998: 57,413,185) ordinary shares, calculated as follows: 1999 1998 Thousands Thousands -------- -------- Basic weighted average number of shares 56,303 56,175 Dilutive potential ordinary shares: Employee share options 712 1,238 -------- -------- 57,015 57,413 -------- -------- Reconciliation to adjusted earnings per share Pence Basic earnings per 20.9 share Non-recurring operating costs 1.1 Goodwill amortisation 0.5 -------- Adjusted earnings per 22.5 share -------- 5. The Annual Report and Accounts for the year ended 31 December 1999, which were approved by the Board of Directors on 13 March 2000 includes an unqualified audit opinion and accounts will be dispatched to shareholders on 24 March 2000. The accounts will be available from that date from the Company Secretary at the Company's registered office, Byron House, Cambridge Business Park, Cambridge, CB4 4WZ. 6. The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The comparative financial information for the year ended 31 December 1998 is abridged and has been extracted from the statutory accounts, on which the auditors issued an unqualified opinion, and which have been delivered to the Registrar of Companies.

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