Interim Results

Roxboro Group PLC 06 September 2004 Date: Embargoed until 07:00am Monday 6 September 2004 Contacts: Harry Tee - Group Chief Executive Alf Vaisey - Group Finance Director The Roxboro Group PLC Tel: 020 7796 4133 (06/09/04) 01223 424626 (thereafter) Alistair Mackinnon-Musson Philip Dennis Hudson Sandler Tel: 020 7796 4133 Email: roxboro@hspr.co.uk Photographs: Available upon request from Hudson Sandler (see above) THE ROXBORO GROUP PLC INTERIM RESULTS The Roxboro Group PLC, the international specialist electronics group, announces its results for the six months ending 30 June 2004. The Roxboro Group consists of two world leading activities: Solartron in electronic measurement and Dialight in electronic lighting. Financial Highlights • Turnover of continuing operations up 1% to £59.2 million and by 7% at constant currency • Profit before tax (excluding goodwill) of continuing operations up 161% to £4.4 million • Operating margin before goodwill recovered to 7.5% • Adjusted EPS before goodwill up by 69% to 9.3 pence per share • Interim dividend up 10% to 3.4 pence • Operational cash flows up to £8.0 million being 181% of operating profit Operational Review • Dialight profitability significantly improved - up 6.5 fold from weak 2003 result • Solartron profit advanced 21% • Dialight's Mexican facility now contributing well • Far East region particularly buoyant • New product introduction pace increases Harry Tee, Group Chief Executive, said: 'I am delighted to report the return to growth of the Group. Both our key activities made good progress in the first half with profits up markedly on the first half last year. It is also very pleasing to again report strong cash generation. The relocation of much of our US production to Mexico in 2003 was difficult, but the operational performance has now greatly improved and the benefits are beginning to be seen in our results Solartron's project visibility in the oil and gas sector has improved and Dialight's volumes continue to be higher than last year. Taking these factors we are well positioned to continue our progress in the second half.' Financial Results We are pleased to report that the positive sentiments in our statements of earlier in the year are reflected in the Group's results for the first six months. Group turnover for the six months to 30 June 2004 increased by 7% at constant currency and in Sterling terms 1% to £59.2 million (2003: £58.7 million). For the continuing businesses, group profit before tax (after goodwill) was £3.9 million (2003: £1.1million), an excellent improvement of 240% over last year. Group operating cash flows were strong at £8 million representing 181% of operating profit (2003: £7.1 million) and benefited from the continued operational improvements brought about by our RoBusT (Roxboro Business Techniques) initiatives which have become part of Roxboro's culture. Adjusted earnings per share advanced 69% to 9.3 pence per share (2003: 5.5 pence per share). The Group ended the period with net cash of £5.7 million. The interim dividend will increase by 10% to 3.4 pence per share (2003: 3.1 pence) and will be paid on 14 October 2004 to shareholders on the register at 17 September 2004. Business Review Solartron and Dialight both made a strong contribution to the group's overall performance. Solartron's operating profit advanced by 21% on similar turnover to last year, while Dialight's operating profit improved by a factor of 6.5 times from its relatively weak performance in the same period in 2003. Solartron 6 months ended 30th June 2004 2003 £m £m Sales 31.0 31.1 Operating Profit 3.3 2.8 At Solartron, following a slow start the activity level picked up markedly and the business completed the first half with operating profits 21% ahead of the same period in 2003. Although the bulk of Solartron's products are manufactured in the UK, a good proportion of its sales are into the US market or other dollar-denominated sales, such as those into the oil and gas sector. The recent weak US Dollar relative to Sterling has therefore limited Solartron's ability to grow turnover and to secure an increasing share of the US market. However, greater operating efficiencies, driven largely by our RoBusT initiatives, management of overheads and a trend to higher margin products, meant that operating margins improved to 11% from 9% last year. Equally the company's ability to generate cash was enhanced by RoBusT, with operating cash flows of £4.7 million, which was 139% of operating profits Sales into the Far East improved by 30% over the same period last year and the company has further strengthened its sales channels in the USA, Middle East and Far East regions and it is anticipated this will add further growth in these strategically important markets. Mobrey/ISA Some project related work, particularly in the oil and gas sector, was delayed by customers for a variety of reasons but visibility on these projects improved at the half-year point. Some of these are now expected to be awarded in the second half although not all are expected to contribute to turnover in the current year. Among the projects recently secured by the business were an initial $500k contract to provide fluid analysis equipment to China Petroleum and a $1.5 million contract for level and flow measuring equipment for the South Pars Gas Field development in Iran. Both were joint bids between the Mobrey and ISA Divisions of Solartron and gave the customer the opportunity to purchase their fluid analysis requirements from one supplier. A new range of water ingress sensor products has been introduced, designed to address the opportunity created by recent legislation requiring all bulk carrier vessels to be fitted with the technology for safety reasons. Metrology Strong sales in the US market, despite the strength of Sterling, more than compensated for weaker sales in Europe and were driven by investment in the automotive sector and new product introductions. A new innovative bore gauge product launched in March has been specified on the Chrysler world engine programme and by American Axle. Sales into Israel also increased as the company's gauging probes are being used by Techjet, a joint venture company in which Rolls Royce is a partner. Solartron continues to be the world's largest producer of gauging probes and the only producer of digital gauging devices which will increasingly replace analogue devices in service. Analytical Following a weak first quarter, sales in the second quarter improved by 28%, with sales into the Far East being particularly strong. An entirely new analytical instrumentation platform, which has been in development for the past two years, will have its primary launch in the second half of the year. The introduction of this product family will effectively double the size of Solartron's available market in the sector and will, over time, improve margins. Last year Solartron improved its operating profit in the second half by 39% and while this level of improvement is not expected in the current year, we are confident of a strong overall performance by the business. Dialight 6 months ended 30th June 2004 2003 £m £m Sales 28.2 27.6 Operating Profit 2.3 0.4 Sales at Dialight showed improvement in constant currency of 13% when compared with 2003, however, this was diluted to some extent by the strength of Sterling. Both the Opto-electronics and Signals divisions of Dialight demonstrated excellent profit improvement. Cash generation at Dialight was also exceptionally strong, at £4.9 million, as the company began to derive the benefits of its move to Mexico in 2003. This, together with our RoBusT programme, is improving operating efficiencies and all the key performance indicators at Dialight. Opto-Electronics Dialight was able to take advantage of some market recovery due to its unique market position in the value added LED indicator market. Sales through major distributors in both Europe and the USA, strengthened as their markets improved in the early part of the year. Direct sales to OEM's also grew at double digit pace. The recovery in the telecommunications/networking equipment sector drove growth in sales to contract manufacturers and OEMs alike. While there was the normal pricing pressure from contract manufacturers based in China, margins in the OE division showed an overall improvement as material costs were reduced and efficiencies improved. While growth in sales through distributors slowed somewhat at the end of the period, OEM demand continued to be strong into the third quarter. Dialight continues to innovate new LED indicator products for OEMs and launched a new dual height surface mounted device incorporating novel optical technology specifically for the server market where two-high yellow and green LEDs are used extensively to indicate channel status. Signals Sales of signals products also grew strongly in the period but the greatest change was to the profitability of the product lines, which are now benefiting from their move to Mexico, completed last year. Production costs have been significantly reduced across all main product lines and the Mexican operations are showing significantly improved performance. While there continues to be some price erosion in road signals modules the segment is now more stable and with Dialight successfully reducing material costs, the signals business showed a good improvement in gross margins. The rail signalling segment continues to grow steadily with further sales to New York Transit and increasing sales to OEMs for solid state level crossing lights. Sales in the aviation line grew well in the period assisted by a Federal Aviation Authority contract to supply Solid State obstruction lights, which were shipped in the first half. In Europe, Dialight is making steady progress in the introduction of its LED signalling products in road, rail and obstruction lights. The latest LED traffic product, Eclipse, was introduced earlier in the year and a number of traffic system OEMs now have the product installed in field trials. Expectations are high that the lower price point of the Eclipse range will accelerate adoption in Europe where the specifications have, until now, resulted in a more expensive product. With the increasing use of LED technology in signalling applications, in which Dialight is a world leader, we expect the Signals Division to continue to demonstrate good growth as the technology captures market share in road, rail and obstruction applications. Illumination Dialight's activities in Illumination are at the start-up phase but have exciting prospects. Some volume shipments of light engines to OEM's have begun but the market is at an early stage in its development The adoption of Solid State or electronic lighting will be driven by the significant advantages the technology brings, including greater efficiency and lower power consumption, greater reliability and longer life and better colour characteristics capable of being digitally controlled to give a full spectrum of colour, including shades (or temperatures) of white light such as warm white or cold white. To this end Dialight launched Spectramix(TM) at the Las Vegas Light Fair earlier in the year and patent applications have been made on a number of the features Spectramix(TM) offers. Spectramix(TM) allows a Solid State electronic light installation, in any environment, to change colour dynamically and move progressively through the colour spectrum or to instantly change from one colour or shade to another. Applications will include architectural, hotel and restaurant, retail and merchandising, theatre and studio, signage and eventually domestic lighting applications. As the lighting industry begins its transition to Solid State lighting, Dialight is, we believe, uniquely positioned to be a major player in the emerging Illumination market, in the same way as the company has already developed in the Indication and Signalling segments. BLP BLP made steady progress, and a modest contribution to profits, in the first half and continues to see strong interest from US utilities in its X-PulseTM remote connect/disconnect product for domestic electricity meters, which utilises local pager networks to provide the remote signal. A significant number of units are on field trials throughout the USA and production is anticipated to begin towards the end of the year. Outlook Oil and gas operators have recently forecast to increase investment in capital projects by in excess of 10%, and as a result Solartron has seen considerable improvement in the visibility of projects in this sector. While the strong momentum in demand for Dialight's Opto-Electronic indicator products slowed a little in the summer months as distributors reduced inventories, volumes remained above those in the previous year. Overall the businesses continue to benefit from operational improvements driven in large part by the Group's RoBusT programmes, together with the benefits of lower production costs in Mexico. Given these factors the Group is well positioned to continue to make progress in the second half. Sir Alan Cockshaw Harry Tee Chairman Group Chief Executive 06 September 2004 Group Profit and Loss Account Unaudited interim results for the half year ended 30 June 2004 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December Notes £'000 £'000 £'000 Turnover Continuing operations 59,182 58,666 122,173 Discontinued operations - 14,606 14,606 2(a) 59,182 73,272 136,779 Operating profit before goodwill amortisation Continuing operations 4,437 1,999 5,437 Discontinued operations - 2,836 2,836 4,437 4,835 8,273 Goodwill amortisation (558) (640) (1,202) Operating Profit after goodwill amortisation Continuing operations 3,879 1,359 4,235 Discontinued operations - 2,836 2,836 Operating Profit 2(b) 3,879 4,195 7,071 Profit on disposal of discontinued operations - 15,586 15,585 Profit on ordinary activities before interest and taxation 3,879 19,781 22,656 Net interest payable (11) (303) (326) Profit on ordinary activities before taxation 3,868 19,478 22,330 Tax on profit on ordinary activities 4 (1,598) (1,557) (2,612) Profit for the financial period 2,270 17,921 19,718 Dividends 5 (1,060) (932) (3,042) Retained profit 1,210 16,989 16,676 Pence Pence Pence Dividends per ordinary share 5 3.4 3.1 10.0 Earnings per ordinary share Basic 6 7.4 31.6 45.4 Adjusted 6 9.3 5.5 12.6 Diluted 6 7.4 31.6 45.4 Group Balance Sheet Unaudited interim results at 30 June 2004 2004 2003 2003 30 June 30 June 31 December £'000 £'000 £'000 Fixed assets Intangible assets 14,906 15,945 15,464 Tangible assets 12,284 14,081 13,100 Investments - 16 - 27,190 30,042 28,564 Current assets Stock 15,026 18,919 16,118 Debtors 25,226 26,720 25,879 Cash at bank and in hand 5,787 42,082 4,332 46,039 87,721 46,329 Creditors Amounts falling due within one year Borrowings (37) (60) (2,364) Other creditors (18,817) (22,590) (19,354) (18,854) (22,650) (21,718) Net current assets 27,185 65,071 24,611 Total assets less current liabilities 54,375 95,113 53,175 Provisions for liabilities and charges (1,912) (1,563) (1,507) 52,463 93,550 51,668 Capital and reserves Called up share capital 3,027 43,168 3,115 Share premium account 6,049 5,930 5,976 Capital redemption reserve 40,193 51 40,104 Profit and loss account 3,194 44,401 2,473 52,463 93,550 51,668 Group statement of total recognised gains and losses Unaudited interim results for the half year ended 30 June 2004 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £'000 £'000 £'000 Profit for the financial period 2,270 17,921 19,718 Currency translation differences on foreign currency net (399) (729) (2,281) investments Total gains recognised in the 1,871 17,192 17,437 period Reconciliation of movements in shareholders' funds Unaudited interim results for the half year ended 30 June 2004 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £'000 £'000 £'000 Total recognised gains and losses 1,871 17,192 17,437 Dividends (1060) (932) (3,042) New share capital 73 69 97 subscribed Share issue expenses - (467) (459) Goodwill previously taken to profit and loss - 21,664 21,664 account (89) - (40,053) Redemption of B Shares Net change to shareholders' funds 795 37,526 (4,356) Balance brought forward 51,668 56,024 56,024 Balance carried forward 52,463 93,550 51,668 Group Statement of Cash Flows Unaudited interim results for the half year ended 30 June 2004 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December Notes £'000 £'000 £'000 Cash flow from operating activities 3 8,014 7,068 10,562 Returns on investments and servicing of finance Interest paid (57) (502) (529) Interest received 42 198 216 Net cash outflow from returns on investment and servicing (15) (304) (313) of finance Taxation (1,375) (1,151) (1,867) Capital expenditure and financial investment Purchase of tangible fixed assets (665) (997) (1,726) Sale of tangible fixed assets 5 41 101 Net cash outflow from investing activities (660) (956) (1,625) Acquisitions and Disposals Disposal of Subsidiary undertakings - 53,581 52,654 Purchase of intangible assets (50) (50) (50) (50) 53,531 52,604 Dividends paid (2,112) (3,916) (4,883) Cash inflow before use of liquid resources and financing 3,802 54,272 54,478 Financing Issue of ordinary share capital 73 69 97 Share issue expenses - - (459) Redemption of 'B' shares (89) - (40,053) Loan advances (repayments) - - (17,065) Capital element of finance lease rental (7) (10) (20) payments (23) 59 (57,500) Increase/ (Decrease) in cash in the period 3,779 54,331 (3,022) Reconciliation of net cash flow to movements in net funds /(debt) Increase/(Decrease) in cash in 3,779 54,331 (3,022) the period Cash outflow from change in debt and lease 7 10 17,085 financing Change in net debt resulting from cash flows 3,786 54,341 14,063 Translation (4) (617) (393) difference Movement in net debt in the 3,782 53,724 13,670 period Net cash/ (debt) at beginning 1,968 (11,702) (11,702) of period Net cash at end of period 5,750 42,022 1,968 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 2003. 2) Segmental information Turnover, operating profit and net assets are analysed below: 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £'000 £'000 £'000 a) Turnover By geographical destination: UK 11,281 16,241 28,562 North America 23,769 30,451 56,005 Other European countries 13,986 16,662 31,367 Rest of the world 10,146 9,918 20,845 59,182 73,272 136,779 By geographical origin: UK 30,381 40,083 71,397 USA 25,535 30,229 58,882 Other European countries 7,141 8,393 15,698 63,057 78,705 145,977 Inter-segment sales (3,875) (5,433) (9,198) 59,182 73,272 136,779 By business operation: Dialight 28,157 27,567 57,916 Solartron 31,025 31,099 64,257 Discontinued operations - Weston - 14,606 14,606 59,182 73,272 136,779 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £'000 £'000 £'000 b) Profit before interest and taxation By geographical origin: UK 3,533 5,075 9,004 USA 2,622 940 1,944 Other European (498) (64) (445) countries Operating profit before central costs and amortisation of 5,657 5,951 10,503 intangible assets Central costs (1,220) (1,116) (2,230) Amortisation of intangible (558) (640) (1,202) assets Operating profit on ordinary activities 3,879 4,195 7,071 Profit on disposal of discontinued operations - 15,586 15,585 Profit before interest and taxation 3,879 19,781 22,656 By business operation: Dialight 2,310 355 1,071 Solartron 3,347 2,760 6,596 Discontinued operations - Weston - 2,836 2,836 Operating profit before central costs and amortisation of 5,657 5,951 10,503 intangible assets Central costs (1,220) (1,116) (2,230) Amortisation of intangible assets (558) (640) (1,202) Operating profit on ordinary activities 3,879 4,195 7,071 Profit on disposal of discontinued operations - 15,586 15,585 Profit before interest and taxation 3,879 19,781 22,656 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £'000 £'000 £'000 c) Net assets By geographical origin: UK 19,170 20,612 21,099 USA 12,730 16,271 14,770 Other European countries 1,684 1,339 1,693 33,584 38,222 37,562 Unallocated central net assets 18,879 55,328 14,106 52,463 93,550 51,668 By business operation: Dialight 17,809 21,722 20,406 Solartron 15,775 16,500 17,156 33,584 38,222 37,562 Unallocated central net assets 18,879 55,328 14,106 52,463 93,550 51,668 Notes to the Financial Report 3) Reconciliation of operating profit to net cash inflow from operating activities 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £'000 £'000 £'000 Operating profit 3,879 4,195 7,071 Depreciation 1,351 2,137 3,390 Amortisation of intangible 558 640 1,202 assets Profit on sale of tangible fixed assets (5) (24) (59) Decrease in stocks 894 297 2,462 Decrease/ (Increase) in debtors 379 (931) (1,988) Increase/ (Decrease) in 543 767 (1,713) creditors Increase/ (Decrease) in 415 (13) 197 provisions Net cash inflow from operating 8,014 7,068 10,562 activities 4) Taxation The tax charge of £ 1,598,000 for the half year to 30 June 2004 reflects the anticipated effective tax rate for the year ending 31 December 2004. 5) Dividends The directors have declared an interim dividend of 3.4p (2003: 3.1p) payable on 14 October 2004 to shareholders on the register on 17 September 2004. 2004 2003 2003 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December £'000 £'000 £'000 Equity Dividends on ordinary Shares Interim proposed 3.4p (2003: 1,023 932 932 3.1p) Final proposed Nil (2003: - - 2075 6.9p) 1023 932 3007 Non Equity Dividends on B shares Paid 37 - 35 1060 932 3042 6) Earnings per share. 2004 2003 2003 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December £000 £000 £000 Profit on ordinary activities after non equity 2,233 17,921 19,683 dividends & taxation Amortisation of goodwill 558 640 1,202 Profit on disposal of discontinued operations (after - (15,420) (15,419) taxation) Profit on ordinary activities after non-equity dividends & taxation and before amortisation of goodwill and disposal of discontinued operations 2,791 3,141 5,466 Number Number Number Weighted average number of 30,080,700 56,648,500 43,324,000 shares Dilutive effect of share 174,600 400 15,000 options Dilutive weighted average number of shares 30,255,300 56,648,900 43,339,000 Pence Pence Pence Basic earnings per share Before amortisation of goodwill and disposal of discontinued operations 9.3 5.5 12.6 After amortisation of goodwill and disposal of discontinued operations 7.4 31.6 45.4 Diluted earnings per share Before amortisation of goodwill and disposal 9.2 5.5 12.6 of discontinued operations After amortisation of goodwill and disposal of 7.4 31.6 45.4 discontinued operations 7) The financial information for the financial year ended 31 December 2003 is not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 8) Shareholder Information Market values of Ordinary shares and 'B' shares for Capital Gains Tax purposes are as follows: First day of trading market values 30 June 2003 Ordinary shares: 218.5p 'B' Shares: 75.5p - ENDS - This information is provided by RNS The company news service from the London Stock Exchange

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