Interim Results
Diploma PLC
14 May 2007
DlPLOMA PLC
FOR IMMEDIATE RELEASE
14 May 2007
ANNOUNCEMENT OF INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 MARCH 2007
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 March 2007 31 March 2006 30 Sept 2006
£m £m £m
Revenue 68.2 63.5 128.2
Operating profit(1) 10.1 9.3 19.4
Profit before tax(2) 10.5 20.3 31.2
Adjusted profit before tax 10.7 9.7 20.4
Free cash flow(2) 1.7 15.2 24.3
Pence Pence Pence
Basic earnings per share(2) 30.2 69.9 105.5
Adjusted earnings per share 31.6 28.9 62.8
Dividends per share 9.0 8.0 23.0
Free cash flow per share(2) 7.5 67.1 108.2
(1) before sale of property and amortisation of acquisition intangible
assets
(2) the results for the comparable period in 2006 included a one-off
profit on sale of property of £10.6m and cash proceeds from the sale
of property of £11.1m
• Revenue and adjusted profit before tax up 7% and 10% respectively; results
impacted by losses of £0.5m on currency translation. Operating margins
increased to 14.8% (2006: 14.6%).
• Adjusting for currency effects and for the contribution from acquisitions,
underlying revenue and operating profits were up 8% and 12% respectively.
• Results benefited from strong growth in European Controls businesses in
Defence, Aerospace and Motorsport. Seals business impacted by slow-down in
North American economy but grew modestly on an underlying basis. Life
Sciences business was up on the comparable period last year, benefiting from
the acquisition of CBISS in October 2006.
• Adjusted earnings per share up 9% at 31.6p; interim dividend up 1.0p (+12.5%)
to 9.0p.
• Free cash flow of £1.7m for the period and cash funds at 31 March 2007 of
£28.9m.
Commenting on the results for the period, Bruce Thompson, Diploma's Chief
Executive said:
'The results in the first half demonstrate that underlying organic growth
remains robust. With trading conditions experienced in the first half broadly
expected to continue in the second half of the year and despite the continuing
negative impact of the strength of sterling on the results of the overseas
businesses, the Group is confident of showing further progress in 2007.'
Notes:
Diploma PLC uses alternative performance measures as key financial indicators to
assess the underlying performance of the Group. These include adjusted profit
before tax, adjusted earnings per share and free cash flow. The narrative in
this Announcement is based on these alternative measures and an explanation is
set out in note 2 to the consolidated financial statements in this Interim
Announcement.
For further enquiries please contact:
Bruce Thompson, Chief Executive Officer 020 7638 0934
Nigel Lingwood, Group Finance Director 020 7448 4875
Ian Seaton, Bankside Consultants 020 7367 8891
NOTE TO EDITORS:
Diploma PLC is an international group of specialised distribution businesses
operating in three sectors:
Life Sciences - suppliers of consumables, instrumentation and related services
to research, environmental and clinical diagnostic laboratories. Principal
companies are Anachem, a1-envirosciences and CBISS in Europe and Somagen in
Canada.
Seals - Suppliers of hydraulic seals, gaskets, cylinders and attachment kits for
heavy mobile machinery. Principal companies are Hercules Bulldog Sealing
Products and HKX in North America and FPE in the UK.
Controls - Suppliers of specialised wiring, connectors, control devices and
fasteners for a range of technically demanding applications. Principal
companies are IS Group in the UK and US, Sommer Filcon in Germany and Hawco in
the UK.
Within each of these sectors, the Diploma businesses serve industry segments
with long term growth potential and with the opportunity for sustainable
superior margins through the quality of customer service, depth of technical
support and value adding activities.
Further information on Diploma PLC can be found at www.diplomaplc.com
HALF YEAR REVIEW TO 31 MARCH 2007
In the six months ended 31 March 2007, the Group continued to generate growth in
sales and profits. Group revenue increased by 7% to £68.2m (2006: £63.5m),
largely driven by strong growth in the Controls businesses. This performance
more than compensated for slower growth in the North American Seals business.
Operating profit, before the sale of property and amortisation of acquisition
intangible assets, increased by 9% to £10.1m (2006: £9.3m). Operating margins
of 14.8% (2006: 14.6%) were slightly ahead of the comparable period last year.
Contributions from recent acquisitions (CBISS and a full half year for HKX) only
partially offset the negative impact on translation of the weaker overseas
currencies. Adjusting for currency effects and acquisitions, the underlying
organic growth rates in revenue and operating profits were 8% and 12%
respectively.
Adjusted profit before tax increased by 10% to £10.7m (2006: £9.7m) benefiting
from increased interest income. Adjusted earnings per share grew by 9% to 31.6p
(2006: 28.9p). On a headline IFRS basis, profit before tax was £10.5m (2006:
£20.3m) and earnings per share were 30.2p (2006: 69.9p). The comparable period
in 2006 included a profit of £10.6m from the sale of Phase 3 of the Stamford
land.
The Directors have declared an increased interim dividend of 9.0p per share
(2006: 8.0p) payable on 20 June 2007 to shareholders on the register on 25 May
2007.
LIFE SCIENCES
The Life Sciences businesses increased sales by 4% to £21.3m (2006: £20.4m) with
operating margins increasing to 15.0% (2006: 14.7%). The contribution from the
newly acquired CBISS business more than compensated for the negative impact on
the Somagen business of the weaker Canadian dollar.
The core Anachem business achieved good growth in sales with a solid underlying
performance from its traditional pipette and tips products. Steady progress has
also been made in a number of new development projects, with the new filtration
products in particular showing promising growth. The instrumentation business
also achieved modest growth with a good contribution from the ReactArray product
line.
The service businesses, supporting both pipettes and capital instruments, again
delivered good growth and now account for 25% of Anachem's total sales. Anachem
is well advanced in the renewal process for the flagship maintenance contract
for Pfizer's main R&D facility in Kent. In addition it has made progress with
the new Cyclertest offering for PCR instruments.
The a1-envirosciences group has been expanded by the acquisition of CBISS in
October 2006. The group now represents over 25% of Life Sciences sector
revenues and this is projected to increase to 30% by the year end. The
a1-safetech containment products business has made good progress in the half
year, though facing a strong comparator from the prior year as a result of the
large order in 2006 from Roche. New containment products have been developed
which are attracting positive interest from pharmaceutical industry customers in
the UK and Continental Europe.
Quotation and demonstration activity in the a1-envirotech analyser business
remained buoyant, with the order bank building towards the end of the period.
Good progress was made in the development, in conjunction with the National
Grid, of a new generation of products for electricity utility companies to
measure the flow of sulphur hexafluoride (SF6) gases.
In the CBISS business, the major driver is the design, engineering and supply of
Continuous Emission Monitoring Systems ('CEMS'). Major CEMS orders were signed
towards the end of the period with Veolia Environmental Services (for large '
Energy from Waste' incinerators) and E.ON UK (for power plants). Service
revenues from long term contracts with CEMS users have remained strong and will
continue to build, as service contracts are signed for the new system
installations. The a1-envirosciences group's gas detection products will now be
consolidated under CBISS management. CBISS will market a broad range of
products which offer to customers an upgrade path from single use gas detection
tubes, through gas analysers, to engineered gas monitoring systems.
Somagen Diagnostic delivered steady growth in the sales of reagents, which are
mostly supplied as part of multi-year reagent rental contracts, funded through
the operating budgets within hospitals. The established supplier lines
performed well and were boosted by the contribution from the newly introduced
Trinity Biotech co-agulation products, which also contributed to growing service
revenues. New suppliers are important to Somagen to replace revenues lost when
other suppliers are acquired by competitors with their own routes to market;
during the past twelve months GeneOhm and DSL have been acquired and
consolidated by competitors.
Compared to prior years, overall sales growth was held back by lower sales of
instruments supplied outside of reagent rental contracts. These instrument
sales have been boosted in previous years by additional tranches of capital
funding provided by individual Provinces. This year, the additional funding was
not forthcoming in any of the Provinces.
SEALS
The Seals businesses saw a decline in sales of 4% in sterling terms to £16.9m
(2006: £17.6m). However on a constant currency basis, sales grew by 7%, partly
benefiting from the additional two months contribution from HKX, acquired in
November 2005. Operating profits remained unchanged on an underlying basis as
margins reduced to 13.6% (2006: 14.8%). The reduction in margins reflected a
combination of one-off costs of a limited reorganisation in the Bulldog
business, together with additional investments to strengthen the existing
operations.
Slowing growth in the US industrial economy and particularly in the construction
sector, has led to generally lower demand and caution within the customer base
of the core Hercules business. Service and order fulfilment levels remained
very solid throughout the period and Hercules maintained its position in the US
market; however, domestic seal and tie-rod cylinder sales were somewhat below
the record levels in the comparable period. In Canada, the closure of the
Vancouver operation was completed successfully and the Western Canadian
operations have now been consolidated in Edmonton. This newly established
operation has met its growth targets in Alberta and has retained a good
proportion of sales with customers in British Columbia; the Ontario and Quebec
operations have experienced less helpful economic conditions.
International sales outside of North America experienced strong growth in the
period benefiting from the increased resources applied to this activity and the
continuing weakness of the US dollar. These international sales now account for
10% of total Hercules sales, with a growing business in South America and with a
network of export dealers serving niches throughout the world.
The Bulldog business matched prior year sales, but with order levels
significantly higher than both sales and orders in the comparable period.
International sales, which represent 60% of Bulldog's business, again were
helped by the weaker US dollar, but the business also benefited from the greater
sales focus now evident in the Reno operations. Operating margins were improved
with further attention on product purchasing and with the re-organisation at
Reno leading to a gradual reduction in headcount.
HKX was acquired in November 2005 and this period's result benefits from an
additional two month contribution compared with the prior half year. HKX
results are driven more strongly by new sales of excavators, which are widely
used in residential construction, as well as commercial and infrastructure
sectors. Excavator sales slowed considerably from prior year record levels and
dealers delayed placing orders due to the market uncertainty, but also in
anticipation of new model introductions. Against this market background, HKX
still achieved growth of 10% on a like-for-like basis, successfully penetrating
new dealer accounts.
FPE continued to experience sluggish market conditions in the UK, but exports
provided growth. In March 2007, FPE completed the acquisition of a small seal
distributor which will now be integrated within FPE's existing operations in
Doncaster.
CONTROLS
The Controls businesses increased sales by 18% to £30.0m (2006: £25.5m) and
increased operating margins to 15.3% (2006: 14.5%). Strong growth was achieved
by the IS Group and Sommer Filcon, benefiting from the continued buoyant
Defence, Aerospace and Motorsport markets.
The IS Group delivered another period of strong growth, with good contributions
from all segments of its business. The core Defence and Aerospace business
continued to benefit strongly from supplying the Urgent Operational Requirements
('UOR's) of the Ministry of Defence. At the same time, Commercial sales also
increased strongly with major orders for sensors and wiring harnesses for power
generators. The representative office in China is now fully operational and the
focus now is on building relationships with key customers.
IS-Motorsport and Clarendon both enjoyed a settled period within F1 racing and
Clarendon has enhanced its position with the F1 teams in Italy and Germany. In
the US, ISM Inc has now established itself across all the key racing series
extending from IRL into ALMS, Grand-Am and Nascar. Plans are in place for a new
sales office in South Carolina to be operational by the end of the year to serve
the new customer base.
Sommer Filcon delivered growth in excess of 30% in the half year, with the
principal driver being major contract successes in the Filcon connector
business. Filcon is not only reaping the benefits of the delivery of the
Eurofighter Tranche 2 orders, but also achieved success supplying to other
military projects, including the Tornado upgrade and the Tiger and NH90
helicopter programmes. Filcon has also had success in non-military
applications. While supply to the Airbus A380 project has been delayed, the
Motorsport connector business continues to develop well. Filcon is also
benefiting from the supply of connectors for the Transrapid trains being built
for the extension of the track in Shanghai.
Sommer has continued to develop its business across its target sectors in an
improving German economy, with steady growth in the supply of specialised wire
and cable and heat shrink tubing to Aerospace, Defence and Motorsport customers.
Sommer also had continued success in supplying to the strong medical
instrument business in Germany.
Sales at Hawco were modestly ahead of the comparable period last year with a
good performance in Refrigeration compensating for slower sales in Controls. In
Controls, the market conditions remained challenging as the competitive and
pricing pressures on UK based Original Equipment Manufacturers ('OEM's)
continued. In response, Hawco has closed the Bolton based sales operation and
consolidated the sales functions into Guildford. It has also increased the
focus on key customers and introduced a 'Quick Pick' range of fast moving, core
products.
In Refrigeration, Hawco achieved growth by gaining more business from medium
sized OEM accounts, as sales to larger customers slowed. The launch of a
simple, clearly priced Contractors Guide, combined again with a focus on medium
sized contractors, boosted sales.
FINANCE
The Group generated cash from operations of £6.4m in the first half of the year
compared with £8.1m in the comparable period; investment in working capital
during the period was £4.8m (2006: £2.3m). This reflected a combination of
advanced stock purchasing to secure price and supply and the impact of the
increased sales activity in the Controls businesses. These two factors
exacerbated the seasonal increase in working capital seen in previous years at
the half year, some of which is expected to reverse in the second half of the
year.
Tax paid in the period of £4.3m included tax due on part of the property gain
realised in 2006, which largely accounted for the increase in tax payments,
compared with the prior period. In addition, £0.6m (2006: £0.1m) was provided
to the Employee Benefit Trust to purchase ordinary shares in the Company.
These additional cash outflows led to a reduction in free cash flow to £1.7m
compared with £15.2m in the comparable period, which last year included £11.1m
of net proceeds from the sale of Phase 3 of the Stamford land.
The Group acquired CBISS Limited, a leading supplier of equipment and services
for environmental monitoring and control, on 9 October 2006 for an initial
consideration of £4.5m, including acquisition expenses and net of cash acquired
with the business. Further payments up to a maximum of £0.5m are payable based
on the performance of the business in financial years 2007 and 2008. At 31
March 2007, goodwill of £4.2m has provisionally been recognised on this
acquisition, pending completion in the second half of the year of a valuation of
any intangible assets in accordance with IFRS 3. In February 2007, the final
tranche of deferred consideration of £0.5m (US$1.0m) was paid in connection with
the acquisition of HKX.
After expenditure on acquisitions and dividends, the Group's cash funds at 31
March 2007 were £28.9m.
CURRENT TRADING
The trading conditions experienced in the first half are broadly expected to
continue in the second half of the year. The Controls businesses are still
benefiting from buoyant European Defence and Aerospace markets and continue to
trade strongly, while the Seals businesses continue to maintain their position
in slower growth markets in North America. In Life Sciences, the environmental
businesses (including the newly acquired CBISS) should benefit from stronger
order books entering the second half of the year.
With this market background and despite the continuing negative impact of the
strength of sterling on the results of the overseas businesses, the Group is
confident of showing further progress in 2007.
BM Thompson
Chief Executive Officer
14 May 2007
Consolidated Income Statement
for the six months ended 31 March 2007
Unaudited Unaudited Audited
31 March 31 March 30 Sept
Note 2007 2006 2006
£m £m £m
REVENUE 3 68.2 63.5 128.2
Cost of sales (43.7) (41.0) (82.4)
Gross profit 24.5 22.5 45.8
Distribution costs (2.1) (1.9) (3.7)
Administration costs (12.3) (11.3) (22.7)
Amortisation of acquisition intangible assets (0.2) - (0.3)
OPERATING PROFIT, BEFORE SALE OF PROPERTY 3 9.9 9.3 19.1
Profit on sale of property - 10.6 11.1
OPERATING PROFIT 3 9.9 19.9 30.2
Finance income 0.6 0.4 1.0
PROFIT BEFORE TAX 10.5 20.3 31.2
Tax expense 4 (3.5) (4.3) (7.0)
PROFIT FOR THE PERIOD 7.0 16.0 24.2
Attributable to:
Shareholders of the Company 6.8 15.7 23.7
Minority interests 0.2 0.3 0.5
7.0 16.0 24.2
EARNINGS PER SHARE
Basic and diluted earnings 5 30.2p 69.9p 105.5p
All activities, both in the current and previous year, relate to continuing
operations.
ALTERNATIVE PERFORMANCE MEASURES (note 2) 31 March 31 March 30 Sept
2007 2006
2006
Note £m £m £m
Profit before tax 10.5 20.3 31.2
Less: Profit on sale of property - (10.6) (11.1)
Add: Amortisation of acquisition intangible assets 0.2 - 0.3
ADJUSTED PROFIT BEFORE TAX 10.7 9.7 20.4
ADJUSTED EARNINGS PER SHARE 5 31.6p 28.9p 62.8p
Consolidated Balance Sheet
as at 31 March 2007
Unaudited Unaudited Audited
31 March 31 March 2006 30 Sept
2007 2006
£m £m £m
NON-CURRENT ASSETS
Goodwill 30.9 31.2 28.0
Acquisition intangible assets 1.9 - 2.0
Other intangible assets 0.7 0.6 0.6
Property, plant and equipment 9.4 10.1 9.5
Deferred tax assets 3.1 3.1 3.4
46.0 45.0 43.5
CURRENT ASSETS
Inventories 24.2 22.8 22.9
Trade and other receivables 23.6 21.8 20.4
Cash and cash equivalents 28.9 30.3 36.7
76.7 74.9 80.0
CURRENT LIABILITIES
Trade and other payables (21.0) (19.6) (20.9)
Current tax liabilities (2.3) (3.9) (2.9)
Other liabilities - (1.1) (0.5)
(23.3) (24.6) (24.3)
NET CURRENT ASSETS 53.4 50.3 55.7
TOTAL ASSETS LESS CURRENT LIABILITIES 99.4 95.3 99.2
NON-CURRENT LIABILITIES
Retirement benefit obligations (4.6) (4.2) (4.7)
NET ASSETS 94.8 91.1 94.5
EQUITY
Share capital 1.1 1.1 1.1
Capital redemption reserve 0.2 0.2 0.2
Translation reserve (1.9) 3.1 0.7
Retained earnings 94.0 85.0 90.9
TOTAL SHAREHOLDERS' EQUITY 93.4 89.4 92.9
Minority interests 1.4 1.7 1.6
TOTAL EQUITY 94.8 91.1 94.5
Consolidated Statement of
Recognised Income and Expense
for the six months ended 31 March 2007
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2007 2006 2006
£m £m £m
Exchange rate adjustments on foreign currency net investments (2.6) 0.9 (1.5)
Changes in fair value of cash flow hedges - 0.1 0.1
Actuarial losses on defined benefit pension schemes - - (0.6)
Deferred tax on actuarial losses - - 0.2
Net (expense)/income recognised directly in equity for the
period (2.6) 1.0 (1.8)
Profit for the period 7.0 16.0 24.2
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD 4.4 17.0 22.4
Attributable to:
Shareholders of the Company 4.2 16.7 21.9
Minority interests 0.2 0.3 0.5
4.4 17.0 22.4
Share Capital Translation Hedging Retained Total
capital redemption reserve reserve earnings
Other Changes in reserve
Shareholders' Equity £m £m £m £m £m £m
At 1 October 2005 1.1 0.2 2.2 (0.1) 71.9 75.3
Total recognised income and expense
for the period attributable to
shareholders - - 0.9 0.1 15.7 16.7
Share-based payments expense - - - - 0.4 0.4
Purchase of own shares - - - - (0.1) (0.1)
Dividends - - - - (2.9) (2.9)
At 31 March 2006 1.1 0.2 3.1 - 85.0 89.4
Total recognised income and expense
for the period attributable to
shareholders - - (2.4) - 7.6 5.2
Share-based payments expense - - - - 0.1 0.1
Dividends - - - - (1.8) (1.8)
At 30 September 2006 1.1 0.2 0.7 - 90.9 92.9
Total recognised income and expense
for the period attributable to
shareholders - - (2.6) - 6.8 4.2
Share-based payments expense - - - - 0.3 0.3
Purchase of own shares - - - - (0.6) (0.6)
Dividends - - - - (3.4) (3.4)
At 31 March 2007 1.1 0.2 (1.9) - 94.0 93.4
Consolidated Cash Flow Statement
for the six months ended 31 March 2007
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2007 2006 2006
Note £m £m £m
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from operations 6 6.4 8.1 20.9
Finance income received 0.6 0.4 1.0
Tax paid (4.3) (3.5) (7.1)
NET CASH FROM OPERATING ACTIVITIES 2.7 5.0 14.8
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries (net of cash acquired) 7 (4.8) (6.6) (7.0)
Deferred consideration paid 7 (0.5) (1.0) (1.0)
Proceeds from the sale of property, plant and equipment 0.5 11.1 11.0
Purchase of property, plant and equipment (0.6) (0.8) (1.3)
Purchase of other intangible assets (0.3) - (0.1)
NET CASH (USED IN)/FROM INVESTING
ACTIVITIES (5.7) 2.7 1.6
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to shareholders (3.4) (2.9) (4.7)
Dividends paid to minority interests (0.3) (0.3) (0.3)
Purchase of own shares (0.6) (0.1) (0.1)
NET CASH USED IN FINANCING ACTIVITIES (4.3) (3.3) (5.1)
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (7.3) 4.4 11.3
Cash and cash equivalents at beginning of year 36.7 25.7 25.7
Effect of exchange rates on cash and cash
equivalents (0.5) 0.2 (0.3)
CASH AND CASH EQUIVALENTS AT END OF PERIOD 28.9 30.3 36.7
ALTERNATIVE PERFORMANCE MEASURES (note 2) 31 March 31 March 30 Sept
2007 2006 2006
£m £m £m
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (7.3) 4.4 11.3
Add: Dividends paid to shareholders 3.4 2.9 4.7
Dividends paid to minority interests 0.3 0.3 0.3
Acquisition of subsidiaries (net of cash acquired) 4.8 6.6 7.0
Deferred consideration paid 0.5 1.0 1.0
FREE CASH FLOW 1.7 15.2 24.3
Notes to the Financial Statements
for the six months ended 31 March 2007
1. BASIS OF PREPARATION
The interim financial statements have been prepared in accordance with the
Listing Rules of the Financial Services Authority and on the basis of the IFRS
accounting policies set out in the Group's published accounts for the year ended
30 September 2006.
This Interim Report, which is unaudited, was approved by the Directors on 14 May
2007. It should be read in conjunction with the 2006 Annual Report, which
contains the most recent audited financial statements.
This Interim Report does not constitute statutory financial statements as
defined in section 240 of the Companies Act 1985. The comparative annual
figures for the year ended 30 September 2006 set out in this report have been
extracted from the Group's published accounts for that year which 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. The figures
for the six months ended 31 March 2006 were extracted from the 2006 Interim
Report which was unaudited.
2. ALTERNATIVE PERFORMANCE MEASURES
The Group uses a number of alternative (non-Generally Accepted Accounting
Practice ('non-GAAP')) financial measures which are not defined within IFRS.
The Directors use these measures in order to assess the underlying operational
performance of the Group and as such, these measures are important and should be
considered alongside the IFRS measures. The following non-GAAP measures are
referred to in this Interim Report.
2.1 Adjusted profit before tax
On the face of the consolidated income statement, 'adjusted profit before tax'
is separately disclosed, being defined as profit before tax and before the costs
of restructuring or rationalisation of operations, the profit or loss relating
to the sale of property and the amortisation and impairment of acquisition
intangible assets. The Directors believe that adjusted profit before tax is an
important measure of the underlying performance of the Group.
2.2 Adjusted earnings per share
'Adjusted earnings per share' is calculated as the total of adjusted profit,
less income tax costs, but excluding the tax impact on the items included in the
calculation of adjusted profit and the tax effects of goodwill in overseas
jurisdictions, less profit attributable to minority interests, divided by the
weighted average number of ordinary shares in issue during the period. The
Directors believe that adjusted earnings per share provides an important measure
of the underlying earning capacity of the Group.
2.3 Free cash flow
On the face of the consolidated cash flow statement, 'free cash flow' is
reported, being defined as net cash flow from operating activities, after net
capital expenditure on fixed assets (excluding business combinations), but
before expenditure on business combinations and dividends paid to both minority
shareholders and the Company's shareholders. The Directors believe that free
cash flow gives an important measure of the cash flow of the Group, available
for future investment.
3. ANALYSIS OF RESULTS
Segmental information is presented in this Interim Report in respect of the
Group's business segments, which is the primary basis of segment reporting. The
business segment reporting format reflects the Group's management and internal
reporting structure.
Revenue Segment
operating profit* Operating profit
31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2007 2006 2006 2007 2006 2006 2007 2006 2006
£m £m £m £m £m £m £m £m £m
By Activity
Life Sciences 21.3 20.4 39.2 3.2 3.0 6.1 3.2 3.0 6.1
Seals 16.9 17.6 35.9 2.3 2.6 5.5 2.1 2.6 5.2
Controls 30.0 25.5 53.1 4.6 3.7 7.8 4.6 3.7 7.8
68.2 63.5 128.2 10.1 9.3 19.4 9.9 9.3 19.1
Unallocated items:
Profit on sale of property - - - - - - - 10.6 11.1
68.2 63.5 128.2 10.1 9.3 19.4 9.9 19.9 30.2
By Geographic Area
United Kingdom 32.3 28.5 58.7 4.1 3.3 7.2 4.1 13.9 18.3
Rest of Europe 12.4 10.0 20.2 2.1 1.8 3.4 2.1 1.8 3.4
North America 23.5 25.0 49.3 3.9 4.2 8.8 3.7 4.2 8.5
68.2 63.5 128.2 10.1 9.3 19.4 9.9 19.9 30.2
* before amortisation of acquisition intangible assets and profit on sale of
property
The profit on sale of property in 2006 of £11.1m arose on disposal of 12.2 acres
of land (known as Phase 3) in Stamford, East Midlands for consideration of
£11.5m, after expenses. There remains 150 acres of land at Stamford which
comprises mostly farm land and former quarry land. In the Directors' opinion
the current value of this land is £0.5m (2006: £0.5m).
4. TAXATION
31 March 31 March 30 Sept
2007 2006 2006
£m £m £m
UK tax charge 1.6 2.4 3.2
Overseas tax charge 1.9 1.9 3.8
Total tax charge 3.5 4.3 7.0
Taxation on profits before tax has been calculated by applying the Directors'
best estimate of the annual rate of taxation to taxable profits for the period.
The rate of taxation on profit on adjusted profit for the period is 32.7%
(2006: 30.9%). Tax of £1.3m was provided at 31 March 2006 on the property
profit in the period.
5. EARNINGS PER 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 period of
22,500,379 (2006: 22,469,915) and the profit for the period attributable to
shareholders of £6.8m (2006: £15.7m). There were no potentially dilutive shares.
Adjusted earnings per share
Adjusted earnings per share is shown by reference to earnings before
amortisation of acquisition intangible assets, exceptional items and related
tax. The Directors consider that this gives a clearer indication of the
underlying performance of the Group. Adjusted earnings are calculated as
follows:
31 Mar 2007 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2006 2006 2007 2006 2006
pence pence pence
per share per share per share £m £m £m
Profit before tax 10.5 20.3 31.2
Tax expense (3.5) (4.3) (7.0)
Minority interests (0.2) (0.3) (0.5)
Earnings for the year attributable to
shareholders of the Company 30.2 69.9 105.5 6.8 15.7 23.7
Profit on sale of property, net of tax - (41.4) (45.3) - (9.3) (10.2)
Amortisation of acquisition intangible assets 1.0 - 1.3 0.2 - 0.3
Tax effects on goodwill and acquisition
intangible assets 0.4 0.4 1.3 0.1 0.1 0.3
ADJUSTED EARNINGS 31.6 28.9 62.8 7.1 6.5 14.1
6. RECONCILIATION OF CASH FLOW FROM OPERATIONS
31 March 31 March 30 Sept
2007 2006 2006
£m £m £m
Profit for period 7.0 16.0 24.2
Depreciation 0.9 0.8 1.6
Amortisation of acquisition intangibles 0.2 - 0.3
Share-based payments expense 0.3 0.4 0.5
Finance income (0.6) (0.4) (1.0)
Profit on disposal of property - (10.6) (11.1)
Tax expense 3.5 4.3 7.0
Operating cash flow before changes in working capital 11.3 10.5 21.5
Increase in inventories (0.9) (0.8) (1.6)
Increase in trade and other receivables (2.9) (1.6) (0.1)
(Decrease)/increase in trade and other payables (1.0) 0.1 1.4
Cash paid into defined benefit schemes (0.1) (0.1) (0.3)
CASH FLOW FROM OPERATIONS 6.4 8.1 20.9
7. ACQUISITIONS
On 9 October 2006, the Group acquired 100% of the share capital of CBISS Limited
('CBISS') for consideration, net of cash acquired, of £4.5m. Further deferred
consideration up to a maximum of £0.5m will be payable, depending on the
operating profits of CBISS in each of the years ended 30 September 2007 and
2008. In addition, £0.3m was spent during the period in acquiring certain trade
assets, including supply agreements.
The provisional fair value of identifiable assets and liabilities of the
acquired business, excluding intangible assets, was £1.1m, including cash of
£0.8m. Provisional goodwill of £4.2m arose on this acquisition and this
goodwill will be analysed into its constituent intangible assets, in accordance
with IFRS 3, in the full year financial statements at 30 September 2007. The
contribution of CBISS to the Group's revenue and operating profit for the six
months ended 31 March 2007 was £1.9m and £0.3m respectively.
In February 2007, £0.5m (US$1.0m) of deferred consideration was paid to the
vendors of HKX Inc as final settlement of their performance payment.
8. DIVIDENDS
The Directors have declared an interim dividend of 9.0p per share (2006: 8.0p)
payable on 20 June 2007 to shareholders on the register on 25 May 2007.
In accordance with IAS 10 'Events after the Balance Sheet Date', this interim
dividend has not been reflected in the interim financial statements. The total
value of the dividend is £2.0m (2006: £1.8m).
9. EXCHANGE RATES
The following exchange rates have been used to translate the results of the
overseas businesses:
Average Closing
31 March 31 March 30 Sept 31 March 31 March 30 Sept
2007 2006 2006 2007 2006 2006
US Dollar 1.95 1.75 1.80 1.96 1.73 1.87
Canadian Dollar 2.25 2.03 2.05 2.26 2.02 2.08
Euro 1.49 1.46 1.46 1.47 1.43 1.47
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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