Final Results

Diploma PLC 18 November 2002 DIPLOMA PLC 18 November 2002 PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR YEAR ENDED 30 SEPTEMBER 2002 2002 2001 Turnover from continuing businesses £73.7m £66.3m Operating profit from continuing businesses, before exceptional items and goodwill amortisation £8.9m £8.8m Profit before tax, exceptional items and goodwill amortisation £9.9m £10.9m Profit before tax, after exceptional items £10.1m £8.7m Basic earnings per share 31.2p 21.5p Adjusted earnings per share 29.4p 30.2p Dividends per share 14.0p 13.0p Net assets per share 225p 221p • Operating profit from continuing businesses, before exceptional items and goodwill amortisation, up to £8.9m from £8.8m. • Profit before tax, after exceptional items of £10.1m compared with £8.7m last year. • Basic earnings per share 31.2p; after adjusting for exceptional items and goodwill amortisation, 29.4p. • Full year dividend up by 1.0p to 14.0p per share, 2.1 times covered by Adjusted earnings per share. • Operating cash flow of £9.9m and proceeds of £3.0m from sales of properties. Net funds of £26.9m at end of year. • On market purchase of own shares returned £8.5m to shareholders; number of ordinary shares in issue at year end is 22.6m (2001: 25.2m). • Restructuring of US and European operations provides a lower cost base; benefits to accrue in 2003. • Disposal of first seven acres of Stamford land completed after 30 September 2002 for £2.6m cash, before expenses. For further enquiries please contact: Bruce Thompson, Chief Executive Officer Nigel Lingwood, Group Finance Director Diploma PLC: 020 7638 0934 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2002 CHAIRMAN'S STATEMENT We have experienced difficult economic and trading conditions this year in most sectors in which we operate. However against this background, the businesses have demonstrated their inherent resilience and have achieved a creditable result. Actions taken during the year to consolidate our businesses to achieve a lower cost base, give me confidence that we are well positioned to take advantage of any economic or market recovery. The Board remains committed to maximising value to shareholders through the expansion of the Group both by investment in the existing businesses and by acquisition. The current economic environment is creating a number of interesting corporate opportunities and Diploma's strong balance sheet should allow the Group to capitalise on this. However, the Board continues to review the Group's capital requirements and this may result in future returns of surplus capital through share buy-backs. Results and Dividends Profit before tax increased by 16.1% to £10.1m from £8.7m benefiting from exceptional profits of £1.1m made on the sale of surplus properties. After excluding exceptional items and goodwill amortisation, operating profits of the continuing businesses were £8.9m compared with £8.8m last year. Sales of the continuing businesses, with contributions from the Bulldog and Clarendon acquisitions, increased by 11.2% to £73.7m. Basic earnings per share were 31.2 pence compared with 21.5 pence last year. Adjusted earnings per share, which are after excluding exceptional items and goodwill amortisation, were 29.4 pence compared with 30.2 pence last year. Cash flow, historically a strength of the Diploma Group, has again been positive. Operating cash flow of £9.9m was supplemented by cash proceeds of £3.0m from the sale of surplus properties. After acquisitions and returning £8.5m to shareholders through an on market share purchase undertaken in December 2001, the Group's net cash funds decreased by £4.8m to £26.9m at the end of the year. Since the year end, we have completed the sale of a first parcel of our property in Stamford for £2.6m cash, before expenses. I am particularly pleased by this achievement as it is the first step in realising the rewards of effort over many years. Since 1973, the Group has owned approximately 150 acres of land adjoining the Williamson Cliff operation in Stamford. A large part of this land comprises environmental and geological sites of special importance, but the Group has identified distinct parcels of land which are likely to have development potential. Having successfully completed the sale of seven acres, the Group is now pursuing the sale of a further eight acre site. There are also reasonable prospects for medium term development of the twelve acre brickworks site formerly occupied by Williamson Cliff. In view of the continuing strong cash generation, robust balance sheet and encouraging results achieved in difficult market conditions, the Directors are recommending an increased final dividend of 9.0 pence (2001: 8.0 pence), raising the total dividend payment for the year to 14.0 pence (2001: 13.0 pence), an increase of 7.7%. Employees and Directors In July this year, we welcomed John Rennocks to the Board as an independent Non-executive Director of the Company. John brings to Diploma his considerable experience as a finance director of a number of companies and also in a range of non-executive roles and I look forward to his contribution. I should also like to thank our employees, who make an essential contribution to the successful development of our businesses. Current Trading Although operating profit from continuing businesses was broadly flat year on year, the second half showed a good improvement over both the first half of the year and the second half of the prior year. The Group's businesses have started the new financial year in line with budget expectations and the actions we have taken in 2002 to reduce costs in both our US and European operations should provide a firm foundation for progress in 2003. CHIEF EXECUTIVE OFFICER'S REVIEW The Group's strategy is to invest in Specialised Distribution businesses with long term growth potential and with the opportunity for sustainable superior margins through the quality of customer service, depth of technical support and other value-adding activities. The objective is to build more substantial, broader based businesses which meet these criteria in the three sectors of Life Sciences, Seals & Components and Interconnect. With difficult economic and market conditions facing all of our businesses, the priority this year has been to continue the strategic development of the Group while at the same time pursuing operating efficiencies to maintain profitability. This has been achieved with further progression against each of the principal Group strategies. Sales from the continuing businesses increased by 11% to £73.7m (2001: £66.3m) and operating profits were maintained at £8.9m (2001: £8.8m). There have been contributions to both sales and operating profits from newly acquired businesses, but off-setting these have been similar levels of investment costs in start-up operations. The underlying performance of the businesses demonstrates their inherent resilience. Focus on Growth Market Segments While the Life Sciences sector continues to have excellent long term growth prospects, this past year has been challenging for all industry participants. The major wave of research work related to the Human Genome project has passed through and the follow-on application research work in both genomics and proteomics has yet to take up the strain. The major pharmaceutical companies, with less confidence in the flow through their drug pipelines, are also carefully scrutinising all purchases of higher value instruments. Our response has been to reduce resources applied to the weaker Instrumentation segments while increasing investment in the Consumables and Service segments which have remained resilient. The attraction of the Seals & Components sector is the recurring revenue stream due to the relatively short lifetime and regular replacement cycle of the product. As growth slowed in all end-use sectors, mobile equipment operators quickly cut back on new purchases from equipment OEM's. Initially, this also impacted the aftermarket with reductions in the inventories of replacement parts and delays in repair work. After a pause however, the demand for repair and maintenance parts has improved ahead of any recovery in OEM equipment purchases. The Interconnect sector has been impacted by weak markets in commercial aerospace and in Germany in general. To offset these negative trends, growth has been generated by focusing on more buoyant segments such as Defence, Marine, Space and Medical. Market share gains have also been achieved in the Motorsport market, fuelled by the acquisition of Clarendon in the UK and the IS Motorsport start-up in the US. Customer Relationships A high priority for all our businesses is to build on strong customer relationships within our selected product/market segments. Selling a broader range of products into key customer accounts strengthens the ties with customers, as well as creating barriers to entry against competitors. The acquisition of Clarendon has added a range of high performance fasteners to our Interconnect product portfolio. This has strengthened relationships with key customers in the Motorsport sector as well as generating many cross-selling opportunities with IS Rayfast. In a similar way, with the acquisition of Bulldog in the US, we are now able to supply a broader range of sealing products (now including specialist gasket kits) to our customers in North America and internationally. Added Value Services We are constantly seeking to identify opportunities for new service offerings to complement our product sales. Again this strengthens customer relationships and gives justification for superior margins. The Service offerings in our Life Sciences businesses have been particularly important in offsetting the effect of slower instrument sales. As part of their overall spending reviews, several industrial customers have begun to consolidate the maintenance and repair of their instruments by seeking to appoint a single contractor or supplier to co-ordinate the servicing of all the equipment on site. Anachem has been at the forefront of this initiative and during the year successfully arranged one of the earliest of these contracts with Pfizer. Strong growth has also been achieved in our pipette servicing business. Geographic Expansion Where we have achieved success in specific product/market segments, we seek to extend this into other geographies. The acquisition of Bulldog, in addition to broadening the product range and customer base, has most importantly increased the international spread of our Seals & Components business. In this sector 35% of our sales are now outside the US. The expansion of Anachem's environmental business into Germany and IS Motorsport into the US demonstrate the alternative investment approach of using start-up operations to expand geographically. Efficient and Responsive Infrastructure We continue to invest in infrastructure and systems to give operational efficiencies and to provide a solid foundation for growth. This is an important element of value added by the Group when transforming small, owner managed companies into more substantial, broader based businesses. Following a programme of investment over the last 2-3 years, our principal businesses are all operating from purpose built or newly expanded facilities designed for efficient operations and with a scale to support significant future growth. Investment is also ongoing in the areas of IT and e-commerce to ensure high levels of customer service as well as operational efficiency. As part of this continuing investment, a new integrated IT system which will service all the Seals & Components businesses, has been selected and will be installed during the year. Strong Focused Management Our culture has always been to ensure that strong, self standing management teams are in place in the operating businesses. Management progression has been effected to ensure appropriate and strong management teams are in place, motivated and rewarded according to success in their businesses. With this management model, it is important not to overburden the businesses with centralised management and head office costs and this year these costs have reduced by over 16%. The Group head office is small and has very specific roles with the businesses in helping formulate and monitor their strategies, in developing management and in exerting financial control. REVIEW OF OPERATIONS LIFE SCIENCES Sales in our Life Sciences businesses have decreased by 4% to £26.9m and operating profits have fallen back further than sales. Good advances were made in the Consumables, Service and Environmental segments of the business. However these gains were offset by sales reductions in the Instrumentation segments, where pharmaceutical and biotechnology companies have reduced expenditure. Operating profits have been impacted further by £0.4m of operating losses in the new German operations and investment of £0.3m in the ReactArray product line. Pipettes & Plastics Anachem's Pipette & Plastics consumables business with the associated pipette servicing activity now accounts for ca. 40% of our total Life Science sales. The Consumables and Services segments are more insulated from reduced budgets in Pharmaceutical and Biotechnology sectors and have benefited from strong demand from academia and research institutions. Our consumables sales matched the strong performance of the previous year and pipette servicing grew by 15% through new contracts and a broader range of service offerings. Instrumentation With severe budget constraints within major pharmaceutical customers, Anachem's instrumentation business suffered. Sales of higher value instruments for use in pharmaceutical and genetic research were down by almost 30% compared to the previous year. Growth in the genomics sector in particular slowed significantly through the year following the completion of research work associated with the Human Genome project. Anachem took action in the second half to rationalise the UK and German operations of a-1 biotech. This will reduce costs while continuing to promote a more specialised range of genomic instrumentation. ReactArray, Anachem's specialised process optimisation product, countered the general trend and performed well. The product range continued to be expanded with the introduction of a new robotic work station designed to link the automated liquid handling process to the specialist ReactArray reaction vessels. Gains were also made in the capital service business which grew by 13% year on year. Environmental The growing environmental business had another successful year and increased sales in the UK by 18%. The Mitsubishi range continued to make gains with the launch of new elemental analysers and a new range of enclosures for potent powders was introduced. Envirotech GmbH, our new start-up operation in Dusseldorf, is developing according to plan and is broadening our base in the sector. SEALS & COMPONENTS Our Seals & Components businesses increased sales by 31% to £28.2m and increased operating profits by a similar magnitude. The sales performance was boosted by a full year contribution from Bulldog, but equally important were strong sales performances from both Hercules and FPE in challenging market conditions. Operating profits increased strongly in line with sales, as overheads were tightly controlled and benefits flowed through from prior year actions. A major re-structuring has been completed in North America, grouping together our activities into Hercules Bulldog Sealing Products. Hercules Bulldog Sealing Products Hercules performed well in a sluggish and uncertain US economy. The company continued to promote its products aggressively and to increase its product range, growing its sales in US dollar terms by 5% year on year. Gross margins were somewhat lower as competitors cut their prices to attempt to hold market share but Hercules demonstrated tight control over overheads and delivered solid growth in operating profits in both the US and Canada. Bulldog (Pevco) was acquired immediately prior to the start of the year at broadly net asset value. It had been operating at close to break-even operating profit for several years. The acquisition has given a substantial boost to our international business outside the US since well over half of Bulldog's business was represented by export sales. It has also broadened our customer base to include parts distributors supplying to specialised diesel engine rebuilders. Finally it has broadened the product line with a range of specialised gaskets. The immediate priority post acquisition, was to secure the customer base by increasing service levels and delivery performance. By June 2002, we were ready to start the process of combining the Hercules and Bulldog companies into a single entity. The merger was completed on 30 September 2002 and there is now a single US corporate entity, Hercules Bulldog Sealing Products with three trading divisions - Domestic US, Canada and International. Exceptional costs of £0.6m have been incurred in implementing this new structure. Fluid Power Equipment (FPE) FPE grew sales by 10% and delivered excellent profit growth as the benefits of earlier reorganisation activity and infrastructure investment began to take effect. The new IT system to be installed this year will service all the Hercules Bulldog locations as well as FPE and will enable back office systems to be streamlined and the full benefits of the group's purchasing power to be achieved. INTERCONNECT Our Interconnect companies increased overall sales by 12% to £18.6m and increased operating profits by a similar percentage. Sales were boosted by the acquisitions of Clarendon in December 2001, Dowatronic in April 2002 and the first full year of trading by IS Motorsport in the US. These contributions countered the effects of weak markets in Aerospace and Germany. Start-up operating losses of £0.1m in the US and increased facility costs at IS Rayfast were offset by reductions in other overhead costs. IS Rayfast IS Rayfast started the year with a strong order book but was impacted by the downturn in the Aerospace market and by a generally subdued UK manufacturing environment. IS Rayfast managed to maintain its sales performance with gains in the Marine Defence market. Specialist printing and marking services for wire identification also made a good contribution. The Symonds Cableform range of high performance lacing cords and adhesives, acquired in September 2001, was integrated into IS Rayfast and achieved its objectives. IS Motorsport In the UK, fewer Formula 1 teams finished the season than started and there were changes to car testing rules which resulted in a different demand profile for suppliers. However the introduction of our Kanban product replenishment service helped us to take market share and progress was made in export markets such as Japan. In the US, IS Motorsport achieved its initial objective of establishing itself as a credible supplier to the IRL/CART open wheel racing series teams. The priority in 2003 is to consolidate these initial gains and broaden the customer base to include other segments of the diverse US Motorsport industry. Clarendon Clarendon, acquired in December 2001, is a supplier of high performance fasteners and seals to the UK Motorsport industry. Clarendon met its sales budget and made a strong profit contribution. In the final quarter of the year, Clarendon secured new business with a major UK supplier to US racing teams. Sommer Sommer performed well to maintain its sales performance of the previous year in a depressed German manufacturing market. In particular, demand was weak from harness suppliers to wireless base stations and other telecommunication infrastructure projects. However, Sommer made advances in other market segments and geographic regions within Germany. It also used the acquisition of Dowatronic to strengthen its presence in the region of Bavaria as well as in the satellite and defence segments. GROUP PROFIT AND LOSS ACCOUNT for the year ended 30 September 2002 30 September 2002 30 September 2001 Before Goodwill and Before Goodwill and goodwill and exceptional goodwill and exceptional exceptional items exceptional items items items (note 2) Total (note 2) Total £m £m £m £m £m £m Turnover (note 1) Continuing operations 71.7 71.7 66.3 66.3 Acquisitions 2.0 2.0 - - 73.7 73.7 66.3 66.3 Discontinued operations 1.9 1.9 20.6 20.6 75.6 75.6 86.9 86.9 Operating profit (note 1) Continuing operations 8.2 (0.5) 7.7 8.8 (0.1) 8.7 Acquisitions 0.7 (0.1) 0.6 - - - 8.9 (0.6) 8.3 8.8 (0.1) 8.7 Discontinued operations - - - 0.9 - 0.9 8.9 (0.6) 8.3 9.7 (0.1) 9.6 Non-Operating items (note 2) Continuing operations - Profit on disposal of fixed - 1.1 1.1 - 0.1 0.1 assets Discontinued operations - Loss on closure of business - (0.6) (0.6) - - - Profit/(loss) on sale of businesses - 0.3 0.3 - (2.2) (2.2) 8.9 0.2 9.1 9.7 (2.2) 7.5 Interest income 1.0 - 1.0 1.2 - 1.2 Profit/(loss) on ordinary 9.9 0.2 10.1 10.9 (2.2) 8.7 activities before tax Taxation (note 3) (3.0) 0.2 (2.8) (3.2) - (3.2) Profit/(loss) on ordinary 6.9 0.4 7.3 7.7 (2.2) 5.5 activities after tax Minority interests (0.1) (0.1) Profit for the financial year 7.2 5.4 Dividends (3.0) (3.3) Retained profit for the year 4.2 2.1 Earnings per 5p share (note 4) On basic and diluted earnings 31.2p 21.5p On adjusted earnings 29.4p 30.2p GROUP BALANCE SHEET as at 30 September 2002 2002 2001 £m £m Fixed assets Intangible assets: Goodwill 4.8 2.0 Tangible assets 9.8 12.0 14.6 14.0 Current assets Stocks 14.8 14.3 Debtors 12.2 13.5 Cash and bank deposits 27.7 31.7 54.7 59.5 Creditors: Amounts falling due within one year (17.3) (16.2) Net current assets 37.4 43.3 Total assets less current liabilities 52.0 57.3 Provisions for liabilities and charges (0.6) (1.3) 51.4 56.0 Capital and reserves Called up equity share capital 1.1 1.3 Capital redemption reserve 0.2 - Profit and loss account 49.6 54.3 Shareholders' funds 50.9 55.6 Equity minority interests 0.5 0.4 51.4 56.0 GROUP CASH FLOW STATEMENT for the year ended 30 September 2002 2002 2002 2001 2001 £m £m £m £m Net cash inflow from operating activities (note 5) 9.9 9.4 Returns on investments and servicing of finance Interest received 1.0 1.2 Equity dividends paid to minority interests - (0.1) 1.0 1.1 Taxation UK corporation tax paid (2.1) (2.1) Overseas tax paid (0.8) (0.6) (2.9) (2.7) Capital expenditure and financial investment Purchase of tangible fixed assets (1.3) (1.7) Proceeds from the sale of tangible fixed assets 3.0 0.8 1.7 (0.9) Acquisitions and disposals Proceeds from disposal of businesses - 12.9 Acquisition of businesses (2.2) (4.1) (2.2) 8.8 Equity dividends paid (3.0) (3.0) Cash inflow before use of liquid resources and 4.5 12.7 financing Management of liquid resources Decrease/(increase) in short term deposits 2.6 (28.4) Financing Return of capital (8.5) - Decrease in cash in the year (note 6) (1.4) (15.7) STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES for the year ended 30 September 2002 2002 2001 £m £m Profit for the financial year 7.2 5.4 Currency translation adjustment on foreign currency net investments (0.7) 0.3 Tax credit/(charge) on foreign exchange adjustment 0.3 (0.1) Total recognised gains and losses for the year 6.8 5.6 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 30 September 2002 2002 2001 £m £m Profit for the financial year 7.2 5.4 Dividends (3.0) (3.3) Retained profit for the year 4.2 2.1 Currency translation adjustment on foreign currency net investments, net (0.4) 0.2 of tax Return of capital (8.5) - Net (reduction)/increase in shareholders' funds (4.7) 2.3 Shareholders' funds at beginning of year 55.6 53.3 Shareholders' funds at end of year 50.9 55.6 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 September 2002 1 ANALYSIS OF RESULTS Operating profit/(loss) before goodwill amortisation, exceptional items and Profit/(loss) before Turnover taxation interest and taxation 2002 2001 2002 2001 2002 2001 £m £m £m £m £m £m By Business Segment Specialised Distribution 73.7 66.3 8.9 8.8 9.4 8.8 Discontinued operations 1.9 20.6 - 0.9 (0.3) (1.3) Total 75.6 86.9 8.9 9.7 9.1 7.5 By Geographic Area United Kingdom 39.9 39.6 5.5 5.1 6.6 5.1 Rest of Europe 7.6 7.3 0.9 1.5 0.9 1.5 United States of America 26.2 19.4 2.5 2.2 1.9 2.2 Continuing operations 73.7 66.3 8.9 8.8 9.4 8.8 Discontinued operations 1.9 20.6 - 0.9 (0.3) (1.3) Total 75.6 86.9 8.9 9.7 9.1 7.5 Turnover by geographical area is stated by origin which, with the exception of the USA, is not materially different from turnover by destination. In the USA, turnover of £3.7m (out of £26.2m) is to customers based outside Europe and North America. The Specialised Distribution business segment includes the expenses of the Group head office; in 2001 these were shown in a separate business segment, together with the results of Williamson Cliff. In 2002 the results of Williamson Cliff are included as discontinued operations; in 2001 discontinued operations also included Special Steels. The comparative results have been restated accordingly. Included in Specialised Distribution is turnover and operating profit before goodwill amortisation and exceptional items of £2.0m and £0.7m, respectively, which relates to acquisitions completed during the financial year; after goodwill amortisation, profit before interest and taxation relating to acquisitions is £0.6m. 2 GOODWILL AND EXCEPTIONAL ITEMS Goodwill Exceptional Goodwill Exceptional amortisation items Total amortisation items Total 2002 2002 2002 2001 2001 2001 £m £m £m £m £m £m Operating profit Continuing operations(a) (0.3) (0.3) (0.6) (0.1) - (0.1) Non-operating items Profit on sale of fixed - 1.1 1.1 - 0.1 0.1 assets Loss on closure of businesses(b) - (0.6) (0.6) - - - Profit/(loss) sale of - 0.3 0.3 - (2.2) (2.2) businesses(c) (0.3) 0.5 0.2 (0.1) (2.1) (2.2) Tax credit on exceptional - 0.2 0.2 - - - items (0.3) 0.7 0.4 (0.1) (2.1) (2.2) (a) Costs of £0.6m have been incurred in completing a restructuring of the Group's US operations, of which £0.4m will be paid in 2002/2003. In addition a provision of £0.3m retained in respect of certain liabilities relating to a defined benefit pension scheme has been released to profit. (b) A loss of £0.6m was incurred on closing the business of Williamson Cliff, which was announced on 28 February 2002. (c) The profit on sale of businesses comprises £0.3m of proceeds received on closure of a pension scheme relating to a divested company. The loss on sale of businesses last year relates to the disposal of Henry Whitham & Son Limited and Carbon & Alloy Inc and the disposal of the businesses carried on by AG Alloys Limited and Abacon Telecommunications Inc. 3 TAXATION The taxation charge on profit before exceptional items and goodwill amortisation for the year ended 30 September 2002 is £3.0m (2001: £3.2m). There is a taxation credit associated with the exceptional items of £0.2m (2001: £nil). 4 EARNINGS PER ORDINARY SHARE Basic and diluted earnings per share Basic and diluted earnings per ordinary share are calculated on the basis of the weighted average number of ordinary shares in issue during the year of 23,116,726 (2001: 25,164,345) and the profit for the financial year, after minority interests, of £7.2m (2001: £5.4m). There were no potentially dilutive shares. Adjusted earnings per share Adjusted earnings per share is shown by reference to earnings before goodwill amortisation, exceptional items and related tax. The Directors consider that this gives a clearer indication of the underlying performance of the Group. Earnings before goodwill amortisation, exceptional items and related tax are calculated as follows: 2002 2001 2002 2001 pence pence per share per share £m £m Profit for the financial year, after minority 31.2 21.5 7.2 5.4 interests Goodwill amortisation 1.3 0.4 0.3 0.1 Exceptional items, net of tax (3.1) 8.3 (0.7) 2.1 Adjusted earnings 29.4 30.2 6.8 7.6 5 RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES 2002 2001 £m £m Operating profit 8.3 9.6 Depreciation 1.3 1.5 Amortisation of goodwill 0.3 0.1 Increase in stocks (0.9) (1.8) Decrease/(increase) in debtors 1.1 (1.6) Increase in creditors 0.8 0.7 (Decrease)/increase in provisions (0.7) 0.9 Costs incurred on business closure/sale, net (0.3) - Net cash inflow from operating activities 9.9 9.4 The net cash inflow from operating activities of £9.9m (2001: £9.4m) includes £nil (2001: £0.8m) relating to discontinued businesses. 6 RECONCILIATION OF NET CASH FLOWS TO THE MOVEMENT IN NET FUNDS 2002 2001 £m £m Decrease in cash in the year (1.4) (15.7) (Decrease)/increase in short term deposits (2.6) 28.4 Change in net funds resulting from cash flows (4.0) 12.7 Increase in debt due within one year (0.8) - Exchange adjustment - (0.1) Net funds at start of year 31.7 19.1 Net funds at end of year 26.9 31.7 7 ANALYSIS OF NET FUNDS 1 October Other non-cash Exchange 30 September 2001 Cash flow movement movement 2002 £m £m £m £m £m Cash at bank and in hand 3.3 (1.4) - - 1.9 Money market deposits 28.4 (2.6) - - 25.8 31.7 (4.0) - 27.7 Guaranteed Unsecured Loan Notes 2001-2003 - - (0.8) - (0.8) Net funds 31.7 (4.0) (0.8) - 26.9 8 DIVIDENDS Subject to approval at the Annual General Meeting, a proposed final dividend of 9.0p per share (2001: 8.0p) will be paid on 21 January 2003 to ordinary shareholders on the register at the close of business on 6 December 2002. 9 FINANCIAL INFORMATION The financial information has been prepared on the basis of the accounting policies set out in the Group's published accounts for the financial year ended 30 September 2001, except with respect to accounting for deferred taxation. At 30 September 2002 the Group has adopted Financial Reporting Standard 19 (Deferred Taxation). This has had no impact on the profit for the current year or previous year or shareholders' funds and consequently the comparative figures have not required restatement. The financial information set out in this preliminary announcement does not constitute the Group's statutory accounts for the years ended 30 September 2002 and 2001. Statutory accounts for the year ended 30 September 2001 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 September 2002, which were approved by the Directors on 18 November 2002, will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on the accounts for the years ended 30 September 2002 and 2001. The reports were unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The Company's Annual General Meeting will be held at 11.00am on 8 January 2003 in the Members' Room, Chartered Accountants' Hall, Moorgate Place, London EC2P 2BJ. This information is provided by RNS The company news service from the London Stock Exchange

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