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.
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