Interim Results
Roxboro Group PLC
11 September 2001
Date: Embargoed until 07:00am, Tuesday 11 September 2001
Contacts: Harry Tee - Group Chief Executive
Alf Vaisey - Group Finance Director
The Roxboro Group PLC
Tel: 020 7796 4133 (11/09/01)
01223 424626 (thereafter)
Alistair Mackinnon-Musson
Philip Dennis
Hudson Sandler
Tel: 020 7796 4133
Email: roxboro@hspr.co.uk
THE ROXBORO GROUP PLC
INTERIM RESULTS
The Roxboro Group PLC, the international specialist electronics company, today
announces interim results for the six months to 30 June 2001.
The Roxboro Group is built upon two distinct core competences: electronic
lighting and electronic measurement. In both these fields, Roxboro's
companies, Dialight in lighting, and Solartron & Weston in measurement, are
acknowledged leaders.
Highlights
O Turnover increased by 12.6% to £91.9m (2000: £81.7m)
O Operating profit before goodwill and exceptionals up by 1.5% to £10.6m
(2000: £10.4m)
O Underlying earnings per share up 5.3% to 11.9p (2000:11.3p)
O Operating cash flow before exceptionals declined to £8.3m (2000: £12.7m)
O Order book declined by 8% to £42.1m (2000: £45.8m)
O Dividend increased to 3.1p per share (2000: 3p per share)
Roxboro's performance in the first half of the current year was satisfactory
particularly in light of the widely recognised difficult market conditions
that currently prevail in some sectors. Weston continued to produce a steady
result in line with expectations while Solartron has improved significantly
over the same period last year, both in terms of sales and profit margins,
which improved by a full 5 points.
The picture at Dialight was mixed. Dialight addresses two distinct markets,
namely the information, communications and technology (ICT) sector and the
rapidly emerging market for electronic lighting utilising light emitting diode
(LED) technology (e.g. in traffic signals), which now represents 50% of
Dialight's turnover. Profits have declined, despite sales in electronic
lighting increasing by more than 100% over the same period last year, as a
result of the much discussed and unprecedented downturn in the ICT sector, to
which we referred in our Statement at the Annual General meeting. This has
continued unabated into the second half of the year and shows no immediate
sign of recovery. Volumes have stabilised but with limited visibility due to
short lead times, the timing of a recovery is difficult to predict. All the
indications are, however, that volumes will improve sometime in the first half
of 2002.
Overall Group performance in the second half year will be constrained by weak
sales of the opto-electronic product line despite good growth in our
electronic lighting business and continued steady progress at Solartron and
Weston.
Harry Tee, Group Chief Executive, said: 'The acquisition of Mobrey last year
has proven to be a very worthwhile investment and has helped Solartron to a
substantially improved result in the first half while Weston has produced a
satisfactory result as we continue to invest in new programmes. Despite the
current difficulties in the ICT sector and the disappointing impact this will
have on our results in the current year, we are very pleased with the progress
in our electronic lighting business, which continues to demonstrate exciting
growth.'
OVERVIEW
Solartron
2001 2000
£m £m
Sales 35.4 30.5
Operating Profit 3.8 1.5
Solartron is one of the leading suppliers of electronic measurement technology
to the energy and process sectors in particular in the measurement of level
and flow. The acquisition of Mobrey in 2000 and its subsequent integration
into Solartron have substantially strengthened the company and have given the
company a strong position in the European level measurement sector. The
acquisition has proven to be a very worthwhile investment and the benefits of
a global sales organisation are now beginning to be realised. Solartron
improved sales by 16% and operating profits by 147% as the benefits of the
integration cost savings achieved last year came through assisted by our
ROBUST (ROxboro BUSiness Techniques) initiatives. Margins improved by a full
five points as a result.
The market recovery we saw early in the year continued into the middle of the
year and orders continue to run at a satisfactory rate.
Sales of the company's successful wet gas measurement system - the Dualstream
II - continue to progress well with a further win for gas measurement
platforms in the Mexican Gulf. We continue to view the prospects for this new
technology with a high degree of confidence.
Despite a weakening US market, sales of the company's gauging products held up
well and continue to dominate this worldwide niche market, while sales of
analytical instruments showed good growth. In particular sales of a recently
introduced Battery Test Instrument are encouraging.
Solartron has met our expectations in the first half and continues to achieve
operating improvements resulting from the benefits we identified at the time
of the acquisition and the merger of the two businesses last year.
Weston
2001 2000
£m £m
Sales 20.2 18.9
Operating Profit 3.4 3.3
Weston is a key supplier of electronic measurement products to the aerospace
market where it has established a reputation as a leader in temperature and
air pressure measurement. It is the supplier of choice to major engine and
aero-equipment manufacturers, including Rolls Royce, GE, Pratt & Whitney and
TRW, among others.
The aerospace industry operates on long timescales and projects initiated now
may not bear fruit for many years. For example, the Trent 500 engine will be
one of Rolls Royce's main products for the next decade and Weston has invested
heavily in developing an entire suite of temperature sensors and other devices
for this engine. Completion of the product development phase is expected early
in 2002 with Weston moving into the production phase in 2003. The company will
see substantial long-term revenue from this programme from 2004 onwards,
particularly in the substantial aftermarket created by carriers replacing
sensors during the life of the aircraft - a timespan of 25 years or so.
Investment is also being made in new programmes for SNECMA, GE and Pratt and
Whitney.
A Long Term Agreement (LTA) has now been agreed between Weston and Rolls
Royce, the terms of which secure all Weston's business with Rolls Royce's for
the next five years.
Weston continues to be in an investment phase and steady progress was
maintained, with both sales and operating profits up a little on the prior
year. Weston continues to make excellent progress in its US operations with
sales and profits improving over the prior year.
The UK operations at Weston were successfully relocated in the period without
significant disruption. The company is now located in a more modern facility
which can accommodate the company's anticipated future growth.
Dialight
2001 2000
£m £m
Sales 36.4 32.2
Operating Profit 4.7 6.7
Dialight leads the world in the design and manufacture of products based on
LED (light emitting diode) technology and addresses two distinct markets.
Dialight supplies opto-electronic assemblies to original equipment
manufacturers in the ICT sector where they are used for status indication,
channel identification and fault analysis. Dialight is also the pioneer in the
rapidly emerging market for electronic lighting using LED technology in a wide
range of applications. Dialight's products are increasingly replacing
conventional incandescent light bulbs in traffic signals, vehicle lighting and
in the future, rail signals, runway lighting and other lighting applications.
Trading in the first six months of 2001 was characterised by exceptionally
strong growth of over 100% in Dialight's emerging, but currently lower margin
electronic lighting business, which will contribute over 50% of Dialight's
total sales this year, together with the well publicised sharp fall in demand
from the ICT sector for opto-electronic devices. As a result of the above, in
the first half year Dialight's profits fell by 30% despite overall sales being
13% higher.
New Structure
Following the initial introduction of the first electronic lighting product in
1996, our business in this area has grown rapidly and will over the next few
years become the dominant part of Dialight's business. Consequently Dialight
is being sub-divided into two divisions; each led by a Senior Vice President.
The first will concentrate on opto-electronic devices to original equipment
manufacturers (OEMs) - the Opto-Electronic Division, while the second will
focus on end-user markets with a wide range of electronic lighting products to
the transport, rail and aviation markets - the Signals Division. Additionally,
Dialight has appointed a Senior Vice President in Europe to drive the
introduction of the technology into the European market. We believe this is a
global opportunity of vast scale and that Dialight is well positioned to lead
the emerging market for products incorporating electronic lighting technology.
Opto-Electronics Division
As market leader in this sector Dialight sells to major OEM's in the ICT
sector which has experienced a sharp fall in demand in the first half of the
current year.
This collapse in demand within the sector follows a period in the second half
of last year when demand was inordinately high leading to significant
overstocking in the supply chain by customers and distributors. The present
market downturn is unprecedented in recent times with demand falling
significantly in the first half, but has now stabilised albeit at sub-optimal
levels. The current low level of activity will unquestionably pick up as
inventories reach more normal levels and will accelerate as end-user markets
recover. However, with disappointing news continuing to come from our
customers, this is now unlikely to happen in this financial year.
This Division generates high margins and continues to be a quality business
today, even with the present market downturn, with margins still in double
digits. While the product line remains important to Roxboro it now represents
less than 20% of Group turnover, down from 50% five years ago, and its
cyclical impact will diminish with time as our electronic lighting and other
businesses continue to grow.
A new initiative in LED light engines is opening up new OEM opportunities for
the Division outside the ICT sector. These white light devices will replace
conventional light sources in many applications, effectively replacing the
miniature light bulb.
Signals Division
Dialight continues to achieve spectacular growth in this area with sales up by
over 100% in the first half year demonstrating the increasing confidence in
this new emerging high flux light emitting diode (LED) based lighting
technology. In particular, sales of our traffic lighting modules more than
doubled as demand increased across the USA, in part driven by the need to
reduce power consumption. Dialight holds almost 60% market share in this
emerging sector and with only 11% of the US market converted to the new
technology, we expect to see strong sales growth continue for some time.
Dialight has also introduced products into rail, aviation and other markets
and is preparing to launch a new initiative into the European market.
Margins at the Signals Division, which are already in double digits, will
continue to improve as assembly is increasingly relocated to our newly
constructed building in Ensenada, Mexico, and production costs decrease as
initiatives under our ROBUST plan take effect. Additionally, many of the newly
released products for the rail and aviation markets are expected to achieve
higher margins than the Traffic Signals products.
Roxboro plans to continue to invest heavily in electronic lighting product
development, with the objective of establishing Dialight at the forefront of
this worldwide revolution in lighting. This will also have the effect of
diminishing the Group's exposure to volatility in the ICT sector.
Board
Richard Koch has retired from the Board having served as a director for the
past six years. We would like to thank Richard for his contribution to the
Group over this period. We are delighted to announce the appointment of two
new non-executive directors to the Board. Bill Whiteley is the Chief Executive
of Rotork PLC and Jeff Hewitt is Deputy Chairman of Electrocomponents PLC.
Both join the Board with immediate effect and bring relevant industry
experience to the Board. We welcome them warmly.
Outlook
Over the full year, profit generated from the exceptional growth in Dialight's
electronic lighting products will not be enough to offset the deterioration in
opto-electronic profits, resulting from significantly reduced volumes in the
ICT sector. Overall Group performance in the second half year will be
constrained by weak sales of the opto-electronic product line despite good
growth in our electronic lighting business and continued steady progress at
Solartron and Weston. We anticipate an improvement in demand at Dialight
sometime in the first half of next year and with the continued strong growth
in our electronic lighting business, we anticipate a significantly better year
for Dialight in 2002, while both Solartron and Weston are expected to deliver
satisfactory results.
The Board, while disappointed at the fall in demand from the ICT sector in the
current year, remains confident that our strategies are proving effective.
Roxboro has identified substantial growth opportunities and, with a strong
balance sheet, is well placed to take advantage of these.
Sir Alan Cockshaw Harry Tee
Chairman Group Chief Executive
11th September 2001
Group Profit and Loss Account
Unaudited interim results for the half year ended 30 June 2001
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31
December
Notes £'000 £'000 £'000
Turnover
Continuing operations 2(a) 91,938 81,670 171,632
Operating profit before goodwill amortisation
Continuing operations 10,561 10,405 24,867
Goodwill amortisation (480) (439) (938)
Operating profit 2(b) 10,081 9,966 23,929
Exceptional items:
Costs of restructuring an Operating - (3,640) (3,561)
Division
Profit on disposal of property - - 3,504
Profit on ordinary activities before 10,081 6,326 23,872
interest
Net interest payable (501) (1,370) (2,193)
Profit on ordinary activities before taxation 9,580 4,956 21,679
Tax on profit on ordinary activities 4 (3,334) (1,641) (7,227)
Profit for the financial period 6,246 3,315 14,452
attributable to shareholders
Dividends (1,766) (1,693) (5,372)
Retained profit 4,480 1,622 9,080
Pence Pence Pence
Dividends per share 5 3.1 3.0 9.5
Earnings per share
Basic 6 11.0 5.9 25.6
Adjusted 6 11.9 11.3 25.8
Diluted 6 11.0 5.7 25.4
Group Balance Sheet
Unaudited interim results at 30 June 2001
2001 2000 2000
30 June 30 June 31 December
£'000 £'000 £'000
Fixed assets
Intangible assets 17,303 17,509 17,783
Tangible assets 24,946 38,042 23,705
Investments 16 16 16
42,265 55,567 41,504
Current assets
Stock 25,195 21,657 21,602
Debtors 38,372 30,061 33,727
Cash at bank and in hand 5,166 8,917 8,557
68,733 60,635 63,886
Creditors
Amounts falling due within one year
Borrowings (171) (21,509) (1,870)
Other creditors (30,034) (25,049) (29,396)
(30,205) (46,558) (31,266)
Net current assets 38,528 14,077 32,620
Total assets less current liabilities 80,793 69,644 74,124
Creditors
Amounts falling due after more than one year
Borrowings (17,626) (18,694) (17,254)
Provisions for liabilities and charges (1,589) (3,832) (1,508)
61,578 47,118 55,362
Capital and reserves
Called up share capital 567 564 565
Share premium account 5,816 5,045 5,370
Capital redemption reserve 51 51 51
Profit and loss account 55,144 41,458 49,376
61,578 47,118 55,362
Group statement of total recognised gains and losses
Unaudited interim results for the half year ended 30 June 2001
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31
December
£'000 £'000 £'000
Profit for the period attributable to equity 6,246 3,315 14,452
shareholders
Currency translation differences on foreign 1,464 630 1,090
currency net investments
Total gains recognised in the period 7,710 3,945 15,542
Reconciliation of movements in shareholders' funds
Unaudited interim results for the half year ended 30 June 2001
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
£'000 £'000 £'000
Total recognised gains and losses 7,710 3,945 15,542
Dividends (1,766) (1,693) (5,372)
Shares issued 448 153 479
Transfer arising on issue of shares (176) - -
Net change to shareholders' funds 6,216 2,405 10,649
Balance brought forward 55,362 44,713 44,713
Balance carried forward 61,578 47,118 55,362
Group Statement of Cash Flows
Unaudited interim results for the half year ended 30 June 2001
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
Notes £'000 £'000 £'000
Cash flow from operating
activities
Net cash inflow from trading 3 8,325 12,690 27,298
operations
Outflow related to 2000 (940) (1,005) (3,221)
exceptional items
Cash flow from operating 7,385 11,685 24,077
activities
Returns on investments and
servicing of finance
Interest paid (706) (1,644) (2,541)
Interest received 192 226 332
Net cash outflow from returns on investment
and
servicing of finance (514) (1,418) (2,209)
Taxation (2,489) (2,575) (7,934)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (3,312) (3,046) (5,659)
Sale of tangible fixed assets 105 204 365
Exceptional item: sale of property (net of - - 18,815
related costs)
Net cash (outflow)/inflow from investing (3,207) (2,842) 13,521
activities
Acquisitions - (22,913) (23,395)
Equity dividends paid (3,687) (3,324) (5,017)
Cash outflow before use of liquid resources
and financing (2,512) (21,387) (957)
Financing
Issue of ordinary share capital 272 153 479
Loan advances 500 25,665 22,950
Loan repayments (140) - (18,474)
Capital element of finance lease rental (45) (45) (89)
payments
587 25,773 4,866
(Decrease)/Increase in cash in the (1,925) 4,386 3,909
period
Reconciliation of net cash flow to movements
in net debt
Increase/(decrease) in cash in the period (1,925) 4,386 3,909
Cash flow from increase in debt and
lease financing (315) (25,620) (4,387)
Change in net debt resulting from cash flows (2,240) (21,234) (478)
Translation difference 176 154 117
Movement in net debt in the period (2,064) (21,080) (361)
Net debt at beginning of period (10,567) (10,206) (10,206)
Net debt at end of period (12,631) (31,286) (10,567)
Notes to the Financial Report
1) Basis of preparation of interim financial information
The interim financial information has been prepared on the basis of the
accounting policies set out in the group's statutory accounts for the year
ended 31 December 2000.
2) Segmental information
Turnover, operating profit and net assets are analysed below:
2001 2000 2000
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
£'000 £'000 £'000
a) Turnover
By geographical destination:
UK 18,233 19,448 38,977
North America 48,046 38,240 83,867
Other European countries 16,460 14,814 30,743
Rest of the world 9,199 9,168 18,045
91,938 81,670 171,632
By geographical origin:
UK 47,568 43,391 86,357
USA 42,881 37,331 82,839
Other European countries 6,962 6,261 12,866
97,411 86,983 182,062
Inter-segment sales (5,473) (5,313) (10,430)
91,938 81,670 171,632
By business operation:
Dialight 36,370 32,221 70,989
Solartron 35,378 30,508 61,624
Weston 20,190 18,941 39,019
91,938 81,670 171,632
Notes to the Financial Report
2) Segmental information (continued)
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
£'000 £'000 £'000
b) Operating profit
By geographical origin:
UK 6,914 5,520 12,425
USA 4,958 6,227 15,382
Other European countries 12 (202) (247)
Operating profit before central costs and 11,884 11,545 27,560
goodwill amortisation
Central costs (1,323) (1,140) (2,693)
Goodwill amortisation (480) (439) (938)
Operating profit on ordinary activities 10,081 9,966 23,929
By business operation:
Dialight 4,675 6,668 15,150
Solarton 3,771 1,526 4,905
Weston 3,438 3,351 7,505
Operating profit before central costs and 11,884 11,545 27,560
goodwill amortisation
Central costs (1,323) (1,140) (2,693)
Goodwill amortisation (480) (439) (938)
Operating profit on ordinary activities 10,081 9,966 23,929
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
£'000 £'000 £'000
c) Net assets
By geographical origin:
UK 33,954 23,545 34,618
USA 21,126 14,279 17,234
Other European countries 1,210 2,562 1,304
56,290 40,386 53,156
Unallocated central net assets 5,288 6,732 2,206
61,578 47,118 55,362
By business operation:
Dialight 21,796 16,778 18,755
Solartron 20,583 14,360 24,631
Weston 13,911 9,248 9,770
56,290 40,386 53,156
Unallocated central net assets 5,288 6,732 2,206
61,578 47,118 55,362
Notes to the Financial Report
3) Reconciliation of operating profit to net cash inflow from operating
activities
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
£'000 £'000 £'000
Operating profit 10,081 9,966 23,929
Depreciation 2,508 2,847 5,501
Goodwill amortisation 480 439 938
Profit on sale of tangible fixed assets (102) (52) (202)
Increase in stocks (3,051) (1,769) (1,799)
(Increase)/decrease in debtors (3,962) 2,005 (872)
Increase/ (decrease) in creditors 2,322 (552) (397)
Other non cash items 49 (194) 200
Net cash inflow from operating activities 8,325 12,690 27,298
4) Taxation
The tax charge of £3,334,000 for the half year to 30 June 2001 reflects
the anticipated effective tax rate for the year ending 31 December 2001.
5) The directors have declared an interim dividend of 3.1p (2000: 3.0p net)
payable on 18 October 2001 to shareholders on the register on 21 September
2000.
6) Earnings per share attributable to equity shareholders are based upon the
weighted average number of shares in issue during the period of 56,665,000
(30 June 2000 56,374,000 shares; 31 December 2000 56,422,000 shares). The
diluted earnings per share are based upon the weighted average number of
shares in issue during the period as adjusted for options outstanding.
2001 2000 2000
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
Pence Pence Pence
Reconciliation to adjusted earnings per share:
Basic earnings per share 11.0 5.9 25.6
Non-recurring exceptional - 4.6 (1.5)
costs
Goodwill amortisation 0.9 0.8 1.7
Adjusted earnings per share 11.9 11.3 25.8
7) The financial information for each of the half years 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 2000
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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