Final Results

Filtronic PLC 28 July 2003 FILTRONIC PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2003 Results in line with Market Expectations £3.8m Pre-Tax Profit from £25.5m Loss; Gearing down 30% to 51%; Dividend maintained Consolidates Leading Market Position in Both Major Businesses Filtronic plc ('Filtronic'), a leading global designer and manufacturer of customised microwave electronic subsystems for the wireless telecommunications and defence industries, announces its Preliminary Results for the year ended 31 May 2003. Worldwide sites are in the UK (North of England, Yorkshire, Midlands, Scotland), USA, Finland, China and Australia. Both major businesses, Wireless Infrastructure and Cellular Handset Products, produced the majority of sales and all of the operating profits, in a year when worldwide demand for the supply of wireless telecommunications products continued to decline, with few signs of an imminent upturn. In his Statement, Professor J. David Rhodes CBE FRS FREng Executive Chairman said: 'Notwithstanding these challenging market conditions, Filtronic consolidated its position as the world's leading independent supplier of transmit / receive modules for mobile base stations. Filtronic is one of the world's leading manufacturers of mobile handset antennas and supplies over 25% of the world demand.' Financial Highlights • Group sales of £241.3m (2002: £280.5m) • Operating profit before non-cash items of £11.0m (2002: £17.8m) • Pre-tax profit of £3.8m (2002: £25.5m loss) • Earnings per share of 1.46p (2002: 39.31p basic loss), 1.45p on a diluted basis (2002: 39.31p diluted loss) • Wireless Infrastructure operating profit of £20.9m (2002: £31.8m) • Cellular Handset Products operating profit of £12.9m (2002: £11.6m) • Final dividend maintained at 1.8p (2002: 1.8p), payable 3 Nov 2003, for 2.7p total (2002: 2.7p) • Cash generation of £19.5m • Net gearing down from 81% to 51% Operational Highlights • Wireless Infrastructure: Outperformance against competitors - Pricing pressure in 2G and 2.5G systems - Low levels of demand for 3G WCDMA products - Well positioned for third generation deployment • Cellular Handset Products: Record sales, operating profit up, margins maintained - Supplied 106 million handsets, up 23%; new Far Eastern customers • Electronic Warfare: Business profitable second half, increasing on monthly basis 2003 - Increasing production volumes for European Fighter Aircraft • Broadband Access: Business relocated to Newton Aycliffe, new products • Compound Semiconductors: New products, new business opportunities, losses reduced - Transfer of closed California business to Newton Aycliffe Development of Compound Semiconductor Technologies • New proprietary processes for switches, power transistors and MMICs Outlook In his Statement, Professor J. David Rhodes said: 'The Board expects that the group will continue to generate cash and reduce indebtedness during the financial year ending 31 May 2004.' 'Overall, our two main businesses are expected at least to maintain their market position. In addition, the Electronic Warfare business is now growing and profitable. The range of products and processes, particularly at Newton Aycliffe, has been expanded to provide a platform for growth.' Enquiries: Professor J. David Rhodes, Executive Chairman, Tel: 020 7786 9600 (Monday - Filtronic plc Thursday) John Samuel, Finance Director, Filtronic plc Professor Christopher Snowden, Director, Tel: 01274 530 622 Filtronic plc Peter Binns, Paul McManus, Emmie Peryer, Binns & Co PR Ltd Tel: 020 7 786 9600 Mob: 07980 541 893 Executive Chairman's Statement Financial results Sales for the year ended 31 May 2003 were £241.3m (2002 £280.5m). Operating profit before exceptional costs, goodwill amortisation, and share compensation costs was £11.0m (2002 £17.8m). After charging exceptional costs of £1.8m, goodwill amortisation of £2.3m, share compensation costs of £0.2m, and net interest and financing currency costs of £2.9m, the profit before tax was £3.8m (2002 £25.5m loss). After tax, this was £1.1m (2002 £29.0m loss), resulting in basic earnings per share of 1.46p (2002 39.31p basic loss), which is 1.45p on a diluted basis (2002 39.31p loss). Net interest and financing currency costs have fallen to £2.9m from £12.5m in 2002. This is partly due to lower levels of net interest payable which reduced to £8.0m from £12.6m in 2002 as a result of buying in $37.2m of 10% Senior Notes during the year. Additionally, a net financing currency exchange gain of £4.2m (2002 £0.1m) has arisen on the 10% Senior Notes and an exceptional net gain of £0.9m (2002 £nil) was realised on buying in the Senior Notes at a discount to par value. Cash At 31 May 2003, Filtronic had a cash balance of £6.5m, having generated £19.5m of cash during the financial year. Filtronic's debt was $103.6m (£63.2m) of 10% Senior Notes, after using £22.1m of cash to buy in $37.2m of 10% Senior Notes. Additionally, the company continues to have bank borrowing facilities totalling £31.0m, none of which was being utilised at the year end. Net gearing was 51%, compared to 81% at 31 May 2002. Dividend The Board is proposing to maintain the final dividend of 1.8p (2002 1.8p) payable on 3 November 2003 to shareholders on the register at 15 August 2003. Operations The segmental analysis of the business is as follows: Operating profit before closure costs, goodwill amortisation and impairment, tangible fixed asset impairment and share compensation Sales Year ended 31 May 2003 2002 2003 2002 £m £m £m £m Wireless infrastructure 151.7 188.6 20.9 31.8 Cellular handset 51.2 48.8 12.9 11.6 products Electronic warfare 25.7 27.0 (0.5) (1.4) Broadband access 10.8 12.5 (2.8) (3.0) Inter segment (1.6) (3.9) - - Central costs - - (4.9) (5.0) ------- ------- ------- ------- Excluding Compound 237.8 273.0 25.6 34.0 semiconductors Compound semiconductors 3.5 7.5 (14.6) (16.2) ------- ------- ------- ------- 241.3 280.5 11.0 17.8 ------- ------- ------- ------- Wireless Infrastructure Market conditions have been characterised by strong pricing pressure in 2G and 2.5G systems and low levels of demand for 3G WCDMA products. As a result, both sales and operating margins in this business segment declined. Although the larger operations in the UK and the USA continued to achieve our target operating margins, low levels of 3G WCDMA demand adversely impacted performance in our Finnish and Australian operations. Overall, Filtronic continued to outperform its competitors and remains the number one independent supplier of its type in the world. Continued focus on customer support, cost reductions and operating efficiency will remain at the forefront of this business segment's strategy. Cellular Handset Products The Cellular Handset Products business had another outstanding year. During the financial year, Filtronic supplied approximately 106 million handset antennas, an increase of 23% over the previous financial year. Over one third of these units were manufactured in Suzhou, China. Several Far Eastern handset manufacturers have been added as customers during the year, although to date they have not accounted for material levels of sales. Electronic Warfare The Electronic Warfare business segment finished the financial year strongly after a disappointing first half. The business was profitable, and increasingly so, in each of the last four months of the financial year, reflecting the increasing volumes of production in the European Fighter Aircraft programme, alongside strong demand for certain products in the USA. Broadband Access The Broadband Access business continued to suffer from low levels of demand for its current point to point transceiver products resulting in continuing losses. New high performance, lower cost, monolithic microwave integrated circuits ('MMICs') from Newton Aycliffe have been designed and are expected to be introduced during the second half of the next financial year, which should assist in improving financial performance in this business segment. Compound Semiconductors Throughout the year, focus has been maintained on developing and qualifying the compound semiconductor processes at our state of the art facility at Newton Aycliffe. As I stated in my Interim Statement in January 2003, our agreement for foundry sales with M/A-COM, Inc., has not proved fruitful. As a result, we have developed a new proprietary switch process and sample product has been supplied to several major potential customers for mobile handset and wireless LAN market applications. In addition, an innovative process for the manufacture of very high power transistors has been developed for the base station power amplifier market. These transistors are essential to meet the high efficiency requirements of our power amplifier development. The MMIC process has been used to supply initial quantities of product to BAE SYSTEMS Avionics Ltd and other customers, including internal requirements in the Broadband Access business. These products address both the defence and wireless communications markets. Filtronic Solid State, California Last year, the Board announced the closure of the fabrication facility for compound semiconductors at Filtronic Solid State, Santa Clara, California. The exceptional closure costs amounted to £1.8m, £0.9m lower than the estimate made in the half year results to 30 November 2002. The compound semiconductor team at Filtronic Solid State is now operating as a 'fabless' compound semiconductor business using the manufacturing capability at Newton Aycliffe. Outlook The Board expects that the group will continue to generate cash and reduce indebtedness during the financial year ending 31 May 2004. Worldwide demand for mobile infrastructure products continued to decline during the past year with few signs of an imminent upturn. Independent forecasts indicate a further decline in the range of 10% to 20% in this market in 2003. Notwithstanding these challenging market conditions, Filtronic has continued to consolidate its position as the world's leading independent supplier of transmit /receive modules for mobile base stations. Despite pricing pressures and difficult markets, the Board remains confident in the medium and long term opportunities offered by the wireless communications markets, including 3G, for both the company's existing and new products including high performance power amplifiers. Filtronic is one of the world's leading manufacturers of mobile handset antennas and supplies over 25% of the world demand. The world market for mobile handsets is independently forecast to show an approximate 10% year on year unit growth in 2003. The Board expects Filtronic to maintain its market position in this business segment in the financial year ending 31 May 2004. The Electronic Warfare business is characterised by long development cycles and requires demanding technical performance. Filtronic has now entered the production phase for several qualified products on a number of major programmes, which should provide sustainable, profitable growth over a number of years. Considerable pressure exists to develop and produce more sophisticated and cost effective solutions in the mobile telecommunications industry. For the last three years our major research and development effort has been aimed specifically at 3G base station equipment. At the heart of the new products are the compound semiconductor transistors manufactured at Newton Aycliffe, which are embedded in proprietary circuits to provide high power (360 Watts peak) very efficiently. Following the successful demonstration of this technology to several Original Equipment Manufacturers ('OEMs'), customer specific 3G power amplifier requirements are now being addressed using internally developed advanced digital linearisation techniques. These customer specific sample units will be delivered to at least four major OEMs over the next few months. Other market demands have led us to develop a larger range of compound semiconductor products at Newton Aycliffe with an increased urgency to introduce multifunction MMICs for both the commercial and defence sectors. Our developments at Newton Aycliffe position Filtronic to take advantage of a wide range of compound semiconductor related market opportunities as they arise. Overall, our two main businesses are expected at least to maintain their market position. In addition, the Electronic Warfare business is now growing and profitable. The range of products and processes, particularly at Newton Aycliffe, has been expanded to provide a platform for growth. Professor J D Rhodes CBE FRS FREng Executive Chairman 28 July 2003 Consolidated Profit and Loss Account for the year ended 31 May 2003 Excluding Compound Compound semi- semi- conductors conductors 2003 2003 2003 note £000 £000 £000 Sales 1, 2 237,816 3,452 241,268 ----------- ----------- ----------- Operating profit/(loss) before closure costs, goodwill amortisation and impairment, tangible fixed asset impairment and share compensation 1, 2 25,658 (14,637) 11,021 Exceptional closure costs 3 - (1,812) (1,812) Goodwill amortisation (2,348) - (2,348) Exceptional goodwill 4 - - - impairment Exceptional tangible fixed 5 - - - asset impairment Share compensation 6 (146) - (146) ----------- ----------- ----------- Operating profit/(loss) 1, 2 23,164 (16,449) 6,715 ----------- ----------- ----------- Net interest payable 7 (7,995) Net financing currency 8 4,236 exchange gain Exceptional net gain on 9 881 repayment of debt ----------- (2,878) ----------- Profit on ordinary 3,837 activities before taxation Taxation on profit on 10 (2,753) ordinary activities ----------- Profit on ordinary 1,084 activities after taxation Dividends (2,006) ----------- Deficit for the year (922) ----------- Adjusted earnings per share Basic 11 0.37p Diluted 11 0.37p Earnings per share Basic 11 1.46p Diluted 11 1.45p Dividend per share 2.70p Consolidated Profit and Loss Account for the year ended 31 May 2002 Excluding Compound Compound semi- semi- conductors conductors 2002 2002 2002 note £000 £000 £000 Sales 1, 2 273,066 7,481 280,547 ----------- ----------- ----------- Operating profit/(loss) before closure costs, goodwill amortisation and impairment, tangible fixed asset impairment and share compensation 1, 2 34,029 (16,196) 17,833 Exceptional closure costs 3 - - - Goodwill amortisation (3,880) (1,472) (5,352) Exceptional goodwill 4 (5,658) (10,378) (16,036) impairment Exceptional tangible fixed 5 - (7,938) (7,938) asset impairment Share compensation 6 (1,570) - (1,570) ----------- ----------- ----------- Operating profit/(loss) 1, 2 22,921 (35,984) (13,063) ----------- ----------- ----------- Net interest payable 7 (12,638) Net financing currency 8 165 exchange gain Exceptional net gain on 9 - repayment of debt ----------- (12,473) ----------- Loss on ordinary activities (25,536) before taxation Taxation on profit on 10 (3,508) ordinary activities ----------- Loss on ordinary activities (29,044) after taxation Dividends (1,999) ----------- Deficit for the year (31,043) ----------- Adjusted earnings per share Basic 11 2.28p Diluted 11 2.25p Loss per share Basic 11 (39.31)p Diluted 11 (39.31)p Dividend per share 2.70p Consolidated Statement of Total Recognised Gains and Losses for the year ended 31 May 2003 2003 2002 £000 £000 Profit/(loss) on ordinary activities after 1,084 (29,044) taxation Currency exchange movement arising on (590) 1,422 consolidation Currency exchange movement on loan 5,329 2,496 ----------- ----------- Total recognised gains and losses for the year 5,823 (25,126) ----------- ----------- Consolidated Balance Sheet at 31 May 2003 2003 2002 £000 £000 Fixed assets Intangible assets 35,769 34,720 Tangible assets 96,272 108,589 ----------- ----------- 132,041 143,309 ----------- ----------- Current assets Stocks 34,344 43,735 Debtors 50,908 55,435 Cash 6,522 9,083 ----------- ----------- 91,774 108,253 Creditors: amounts falling due within one year 38,821 39,774 ----------- ----------- Net current assets 52,953 68,479 ----------- ----------- Total assets less current liabilities 184,994 211,788 Creditors: amounts falling due after one year 61,942 93,769 Provision for deferred tax 750 408 Deferred income 13,143 12,415 ----------- ----------- Net assets 109,159 105,196 ----------- ----------- Capital and reserves Called up share capital 7,430 7,409 Share premium account 135,851 134,151 Shares to be issued 4,321 6,682 Revaluation reserve 106 106 Other reserve 828 - Profit and loss account (39,377) (43,152) ----------- ----------- Equity shareholders' funds 109,159 105,196 ----------- ----------- Consolidated Cash Flow Statement for the year ended 31 May 2003 2003 2002 note £000 £000 Net cash flow from operating activities A 38,528 64,218 ----------- ----------- Returns on investment and servicing of finance Interest received 231 358 Interest paid (7,638) (11,629) ----------- ----------- Net cash flow from returns on investment (7,407) (11,271) and servicing of finance ----------- ----------- Tax paid (4,128) (2,345) ----------- ----------- Capital expenditure Purchase of tangible fixed assets (8,198) (11,369) Sale of tangible fixed assets 1,378 1,312 Government grants received 1,319 1,034 ----------- ----------- Net cash flow from capital expenditure (5,501) (9,023) ----------- ----------- Equity dividends paid (2,002) (1,992) ----------- ----------- ----------- ----------- Net cash flow before financing 19,490 39,587 ----------- ----------- Financing Issue of shares - 264 Loans repaid (22,107) (21,982) ----------- ----------- Net cash flow from financing (22,107) (21,718) ----------- ----------- (Decrease)/increase in cash B (2,617) 17,869 ----------- ----------- Notes to the Consolidated Cash Flow Statement for the year ended 31 May 2003 A Reconciliation of operating profit/(loss) to net cash flow from operating activities 2003 2002 £000 £000 Operating profit/(loss) 6,715 (13,063) Goodwill amortisation 2,348 5,352 Exceptional goodwill impairment - 16,036 Share compensation 146 1,570 Depreciation 19,322 20,433 Exceptional tangible fixed asset - 7,938 impairment (Profit)/loss on disposal of tangible (518) 191 fixed assets Licence fee income received - 10,000 Licence fee released (66) - Government grants released (525) (134) Movement in stocks 8,734 7,445 Movement in debtors 3,876 12,115 Movement in creditors (1,504) (3,665) ----------- ----------- Net cash flow from operating 38,528 64,218 activities ----------- ----------- B Reconciliation of net cash flow to movement in net debt 2003 2002 £000 £000 (Decrease)/increase in cash (2,617) 17,869 Cash flow from debt 22,107 21,982 ----------- ----------- Change in net debt from cash flows 19,490 39,851 Non-cash movement 293 (1,367) Currency exchange movement 9,483 2,754 ----------- ----------- Movement in net debt 29,266 41,238 Opening net debt (84,686) (125,924) ----------- ----------- Closing net debt (55,420) (84,686) ----------- ----------- C Analysis of movement in net debt At Currency At 1 June Cash Non-cash exchange 31 May 2002 flow movement movement 2003 £000 £000 £000 £000 £000 Cash 9,083 (2,617) - 56 6,522 Loans due (93,769) 22,107 293 9,427 (61,942) after one year ----------- ----------- ----------- ----------- ----------- Net debt (84,686) 19,490 293 9,483 (55,420) ----------- ----------- ----------- ----------- ----------- Consolidated Reconciliation of Shareholders' Funds for the year ended 31 May 2003 2003 2002 £000 £000 Profit/(loss) on ordinary activities after 1,084 (29,044) taxation Dividends (2,006) (1,999) ----------- ----------- Deficit for the year (922) (31,043) Contribution to QUEST - (461) Currency exchange movement arising on (590) 1,422 consolidation Currency exchange movement on loan 5,329 2,496 Issue of shares 2,507 3,229 Shares to be issued - shares issued (2,507) (2,504) Shares to be issued - share compensation 146 1,570 ----------- ----------- Movement in shareholders' funds 3,963 (25,291) Opening shareholders' funds 105,196 130,487 ----------- ----------- Closing shareholders' funds 109,159 105,196 ----------- ----------- Notes to the Financial Statements for the year ended 31 May 2003 1 Geographical origin segment analysis 2003 2002 £000 £000 Sales United Kingdom 102,807 108,951 Finland 64,954 68,936 United States of America 56,967 98,871 Australia 5,490 14,962 China 21,791 12,857 Inter segment (10,741) (24,030) ----------- ----------- 241,268 280,547 ----------- ----------- Operating profit/(loss) before closure costs, goodwill amortisation and impairment, tangible fixed assets impairment and share compensation United Kingdom 167 2,862 Finland 8,087 12,316 United States of America 2,895 2,482 Australia (2,004) 793 China 6,811 4,332 Central costs (4,935) (4,952) ----------- ----------- 11,021 17,833 ----------- ----------- Operating profit/(loss) United Kingdom 167 2,862 Finland 5,960 10,424 United States of America 716 (26,522) Australia (2,004) 793 China 6,811 4,332 Central costs (4,935) (4,952) ----------- ----------- 6,715 (13,063) ----------- ----------- The operating profit/(loss) in the United States of America is after charging £1,812,000 (2002 £nil) of exceptional closure costs, £nil (2002 £16,036,000) of exceptional goodwill impairment and £nil (2002 £7,938,000) of exceptional tangible fixed asset impairment. Notes to the Financial Statements for the year ended 31 May 2003 2 Business segment analysis 2003 2002 £000 £000 Sales Wireless infrastructure 151,715 188,589 Cellular handset products 51,242 48,845 Electronic warfare 25,721 26,977 Broadband access 10,796 12,544 Inter segment (1,658) (3,889) ----------- ----------- Excluding compound semiconductors 237,816 273,066 Compound semiconductors 3,452 7,481 ----------- ----------- 241,268 280,547 ----------- ----------- Operating profit/(loss) before closure costs, goodwill amortisation and impairment, tangible fixed assets impairment and share compensation Wireless infrastructure 20,962 31,777 Cellular handset products 12,961 11,570 Electronic warfare (492) (1,336) Broadband access (2,838) (3,030) Central costs (4,935) (4,952) ----------- ----------- Excluding compound semiconductors 25,658 34,029 Compound semiconductors (14,637) (16,196) ----------- ----------- 11,021 17,833 ----------- ----------- Operating profit/(loss) Wireless infrastructure 20,962 31,777 Cellular handset products 10,834 9,678 Electronic warfare (713) (1,583) Broadband access (2,984) (11,999) Central costs (4,935) (4,952) ----------- ----------- Excluding compound semiconductors 23,164 22,921 Compound semiconductors (16,449) (35,984) ----------- ----------- 6,715 (13,063) ----------- ----------- The operating loss of compound semiconductors is stated after charging £1,812,000 (2002 £nil) of exceptional closure costs, £nil (2002 £10,378,000) of exceptional goodwill impairment and £nil (2002 £7,938,000) of exceptional tangible fixed asset impairment. The operating loss of broadband access is stated after charging £nil (2002 £5,658,000) of exceptional goodwill impairment. Notes to the Financial Statements for the year ended 31 May 2003 3 Exceptional closure costs 2003 2002 £000 £000 Exceptional closure costs 1,812 - ----------- ----------- The exceptional closure costs relate to the closure of the compound semiconductor fabrication facility at Filtronic Solid State, Santa Clara, California. 4 Exceptional goodwill impairment 2003 2002 £000 £000 Exceptional goodwill impairment - 16,036 ----------- ----------- There has been no impairment to goodwill in the year ended 31 May 2003. In the year ended 31 May 2002, £10,378,000 of the exceptional goodwill impairment arose in respect of the compound semiconductor operation at Filtronic Solid State and £5,658,000 in respect of Filtronic Sigtek, Inc., which forms part of the broadband access business segment. 5 Exceptional tangible fixed assets impairment 2003 2002 £000 £000 Exceptional tangible fixed asset impairment - 7,938 ----------- ----------- There has been no impairment to tangible fixed assets in the year ended 31 May 2003. In the year ended 31 May 2002, the whole of the exceptional tangible fixed asset impairment arose in respect of the compound semiconductor operation at Filtronic Solid State. 6 Share compensation 2003 2002 £000 £000 Share compensation 146 1,570 ----------- ----------- As a result of the acquisition of Filtronic Sigtek, Inc., on 22 August 2000, a maximum cumulative charge of £4,285,000, comprising the issue to certain employees of Filtronic Sigtek, Inc. of a maximum of 364,067 ordinary shares of 10p each in Filtronic plc, could arise over the four year period following the acquisition. This share compensation is contingent on Filtronic Sigtek, Inc., maintaining the number and quality of its engineers over that period. The cumulative charge at 31 May 2003 was £4,009,000 (2002 £3,863,000). Notes to the Financial Statements for the year ended 31 May 2003 7 Net interest payable 2003 2002 £000 £000 Interest receivable Interest on bank deposits 231 358 ----------- ----------- Interest payable Interest on bank borrowings 51 460 Interest on other loans 7,587 11,169 Debt issue costs - amortisation 588 824 Debt issue costs - loss on repayment of - 543 debt ----------- ----------- 8,226 12,996 ----------- ----------- ----------- ----------- Net interest payable 7,995 12,638 ----------- ----------- 8 Net financing currency exchange gain 2003 2002 £000 £000 Currency exchange gain/(loss) on cash 138 (224) balances Currency exchange gain on loan 4,098 389 ----------- ----------- 4,236 165 ----------- ----------- 9 Exceptional net gain on repayment of debt 2003 2002 £000 £000 Profit on repayment of debt 1,443 - Debt issue costs - loss on repayment of (562) - debt ----------- ----------- 881 - ----------- ----------- Notes to the Financial Statements for the year ended 31 May 2003 10 Taxation on profit/(loss) on ordinary activities 2003 2002 £000 £000 Current tax United Kingdom 37 162 Overseas 2,425 2,938 ----------- ----------- 2,462 3,100 ----------- ----------- Deferred tax Overseas origination and reversal of timing differences 291 408 ----------- ----------- ----------- ----------- 2,753 3,508 ----------- ----------- The United Kingdom current tax charge arises from taxes paid overseas on income paid to the United Kingdom which cannot be fully relieved against United Kingdom taxes. The overseas tax charge for the year arises primarily from the group's operations in Finland and to a lesser extent in China, where taxable profits cannot be relieved by losses available in other jurisdictions. Additionally, the overseas tax charge includes certain state taxes in the United States of America. Notes to the Financial Statements for the year ended 31 May 2003 11 Earnings/(loss) per share 2003 2002 £000 £000 Adjusted basic earnings per share 0.37p 2.28p Effect of adjusted items net of taxation 1.09p (41.59)p ----------- ----------- Basic earnings/(loss) per share 1.46p (39.31)p ----------- ----------- Adjusted diluted earnings per share 0.37p 2.25p Effect of adjusted items net of taxation 1.08p (41.56)p ----------- ----------- Diluted earnings/(loss) per share 1.45p (39.31)p ----------- ----------- £000 £000 Adjusted profit 273 1,687 Exceptional closure costs (1,812) - Goodwill amortisation (2,348) (5,352) Exceptional goodwill impairment - (16,036) Exceptional tangible fixed asset - (7,938) impairment Share compensation (146) (1,570) Net financing currency exchange gain 4,236 165 Exceptional net gain on repayment of debt 881 - ----------- ----------- Profit/(loss) on ordinary activities after 1,084 (29,044) taxation ----------- ----------- Weighted average number of shares in issue 74,245,267 73,881,832 Dilution effect of share options - 243,482 Dilution effect of contingently issuable 459,850 708,543 shares ----------- ----------- Diluted weighted average number of shares 74,705,117 74,833,857 ----------- ----------- The adjusted earnings/(loss) per share figures have been provided in order that the effects of the adjusted items on reported earnings per share can be fully appreciated. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 May 2003 or 31 May 2002. Statutory accounts for 2002 have been delivered to the registrar of companies, and those for 2003 will be delivered following the company's annual general meeting. The auditors have reported on the 2002 accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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