Final Results
Filtronic PLC
01 August 2005
FILTRONIC PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MAY 2005
Results in line with market expectations; Group returned to growth; Bank
facilities amended and rescheduled; Progress on sale of Handset Products
division
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 2005. Worldwide sites are in the UK (North of England, Yorkshire, Midlands,
Scotland), USA, Finland, China and Australia.
Filtronic is one of the world's leading independent suppliers of transmit/
receive modules for base stations and the world's leading manufacturer of mobile
handset antennas. The contribution to sales is: Wireless Infrastructure (64%),
Handset Products (19%), Integrated Products (17%).
Financial Highlights
• Group sales £262.9m (2004: £245.1m)
• Operating profit £6.8m (2004: £4.8m)
• Pre-tax profit £5.5m (2004: £0.9m)
• Basic EPS 7.10p per share (2004: loss per share 2.38p)
• Diluted EPS 7.09p (2004: loss per share 2.38p)
• Final dividend maintained at 1.80p (2004: 1.80p), payable 1 November
2005, making total dividend 2.70p (2004: 2.70p)
• Net gearing reduced from 51% to 41%
• Bank facilities amended with Barclays and ABN AMRO and repayment
rescheduled over five years
Operational Highlights
• Wireless Infrastructure:
- Dominating market for bases station filters with 28% market share
- Supplying production quantities to all major OEMs
- Started supply of integrated power amplifiers for base stations
• Integrated Products:
- High volume semiconductor contract supported by round the clock
working at the foundry at Newton Aycliffe
- New contract started with ITT for electronic warfare subsystem in US
- New point to point microwave links being sold to 3 OEMs
• Handset Products:
- In period of exclusive negotiations for its disposal
• Board appointments:
John Roulston as Group CEO on 6 September 2004, Charles Hindson as Group
Finance Director on 14 December 2004 and Iain Gibson joined on 21 February
2005 and became CEO of the Integrated Products division on 6 April 2005.
• Disposal of sites in Merrimack USA and Brisbane Australia for £6.3m
• Capital expenditure of £13.0m (2004 £11.7m)
Outlook
Professor J. David Rhodes said: 'We see continued growth prospects for the
group. Wireless Infrastructure is experiencing a substantial market recovery and
the strategic efforts undertaken over the past few years in power amplifiers is
increasing our presence in this important market sector. In Integrated Products,
we have acquired volume contracts in compound semiconductors for our foundry at
Newton Aycliffe, which now requires to meet the ramp up in its production, and
strengthened our defence position in the United States. For the coming year,
the group is well positioned for growth, due to strengthening markets in the
communications sector.'
Enquiries
Filtronic plc:
Professor J David Rhodes, Chairman Tel: 01274 530622 / 07850 827280
Professor John Roulston, Group Chief Executive Officer Tel: 01274 530622 / 07800 706318
Charles Hindson, Group Finance Director Tel: 01274 530622 / 07800 706319
Binns & Co PR Ltd:
Peter Binns / Paul McManus Tel: 020 7786 9600 / 07980 541893
Chairman's Statement
I am pleased to report that over the year the group has returned to growth, with
sales for the year ended 31 May 2005 increased by 7% to £262.9m (2004 £245.1m)
and operating profit increased by 42% to £6.8m (2004 £4.8m). The profit before
tax was £5.5m (2004 £0.9m) and the profit after tax was £5.3m (2004 £1.8m loss).
The Board is therefore proposing to maintain a final dividend of 1.80p (2004
1.80p) payable on 1 November 2005 to shareholders on the register at 23
September 2005.
This year, it has been satisfying to observe the progress made in both the
Wireless Infrastructure and Integrated Product divisions. Wireless
Infrastructure achieved sales growth of 16% and with continuing attention to
manufacturing costs increased operating profit by 68%, year on year. The
Integrated Products division, where sales grew by 26% (after the exclusion of
the business sold in December 2003), again continued the trend of reducing
operating losses achieving 26% reduction year on year.
In July 2005, the Company arranged an amended bank facility with Barclays and
ABN AMRO, rescheduling these facilities over a five year term with revised
financial covenants.
The focus during the main part of the year for the Handset Products division has
been its preparation for disposal. I am now pleased to announce that exclusive
negotiations are progressing.
The year has also been active for the company in strengthening the Board. The
role of Chairman and Group CEO has been divided. John Roulston joined as Group
CEO on 6 September 2004 and Charles Hindson as Group Finance Director on 14
December 2004. Iain Gibson joined on 21 February 2005 and became CEO of the
Integrated Products division on 6 April 2005.
During the coming year, the Board intends to appoint new non-executive directors
and has engaged external advisors to assist with the appointments. I am,
though, gratified that current non-executive directors are willing to offer
themselves for re-election at the annual general meeting until their successors
are appointed and, for this interim period, to bring their independent advice to
the company's affairs.
Looking to the coming year, we see continued growth prospects for the group.
Wireless Infrastructure is experiencing a substantial market recovery and the
strategic efforts undertaken over the past few years in power amplifiers are
increasing our presence in this important market sector. In Integrated
Products, we have acquired volume contracts in compound semiconductors for our
foundry at Newton Aycliffe, which now requires to meet the ramp up in its
production, and strengthened our defence position in the United States through a
contract for supply of sub-systems for upgrade of widely deployed airborne
electronic countermeasures equipment.
I would also like to thank all of our employees across our different operations
throughout the world for their continued dedication and contribution to the
business, reflecting in particular on the difficult changes that have take place
in reducing manufacturing at the Shipley site in the UK. For the coming year,
the group is well positioned for growth, due to strengthening markets in the
communications sector.
Professor J David Rhodes CBE FRS FREng
Chairman
1 August 2005
Group CEO's Operating Review
Summary
My first year with Filtronic plc has been one of growth and consolidation within
the group, supported by returning markets.
Wireless Infrastructure has shown sustained above market growth for its
filter-based transmit-receive modules and made further progress in establishing
itself as a force in the base-station power amplifier market, a strategic
objective in which we have invested. The inherent technical and manufacturing
strengths in the division continue to serve it in maintaining margins, combating
price pressure with design innovation and opening new product opportunities
through increased integration of base-station functions.
Integrated Products has continued to make progress on semiconductor process
technology and merchant market offerings from its compound semiconductor foundry
at Newton Aycliffe while reducing losses and preparing for the start of high
volume manufacture of switches for mobile handsets in the coming financial year.
Sales in the merchant arena have been slow leading us to review our sales
approach to this market. The volume switch market, which has taken longer than
forecast to mature, is showing strength.
The division has relocated its businesses at Merrimack and Natick in the US into
a larger facility at Hudson, New Hampshire, from which it is servicing a major
new defence contract with ITT. The improved facilities will allow us to bid
competitively for larger contracts, consistent with the strategy of developing
business opportunities we perceive in the large US defence market.
At the annual general meeting in September 2004, the Chairman announced the
Board's decision to dispose of the Handset Products division, preferably by
means of an IPO on the Finnish stock exchange. Preparations were put in hand to
achieve this, but by January it was clear that the market conditions had
deteriorated to the point where the contemplated IPO would not realise
appropriate value. The decision was announced in January that the company would
seek a buyer for the business and in June we informed the market that we entered
into detailed negotiations. These exclusive negotiations are progressing.
The segmental analysis of the operating results is as follows:
Sales Operating profit
Year ended 31 May 2005 *2004 2005 *2004
£m £m £m £m
Wireless Infrastructure 168.4 145.2 18.1 10.7
Handset Products 50.0 60.2 3.6 11.2
Integrated Products 43.6 38.4 (9.9) (13.4)
Central Services 3.6 3.9 (5.0) (3.7)
Inter segment (2.7) (2.6) - -
262.9 245.1 6.8 4.8
* The results for the year ended 31 May 2004 have been restated using the
revised accounting policy described in note 2 to the financial statements. The
average rate of exchange for the year is now used to translate the results of
the overseas subsidiaries.
Wireless Infrastructure
This business segment under the leadership of Alan Needle, divisional CEO,
dominates the independent global market in filter-based components and
sub-systems for cellular base-stations and is using its established position
with OEMs (Original Equipment Manufacturers) to expand into the adjacent product
area of power amplifiers. The market has been under continual price pressure
which has forced investment in global low-cost manufacturing from Filtronic and
its competitors. The value of this transition is nearly exhausted shifting
emphasis towards superior product design and technology insertion throughout
product life, areas where Wireless Infrastructure can differentiate itself and
achieve competitive advantage.
The wide design competence of the division allows economies to be gained through
integration of functions, typical opportunities arriving through embedded
digital processing for signal conditioning and for computer interface to
base-station software. By maintaining in-house expertise and capacity in
ferrites, ceramics and digital processing to complement its filter technology,
the product offerings can be optimised for performance and value.
In the case of power amplifiers, the company's compound semiconductor facility
holds the transistor technology for providing performance levels beyond the
reach of standard market components. There is a growing appreciation of the
need for higher performance amplifiers as new data transmission formats are
required in 3G WCDMA networks and as network loading increases spectral
occupancy. We see this as creating an additional growth impetus to our power
amplifier business.
The business has capitalised on the ongoing improvements in the overall market
worldwide, with the filter-based transmit-receive modules growing sales 15% over
the year, which we consider outperformed the overall expansion of the market
estimated to be in the range of 12% to 14%. The market continues to be dynamic,
with more OEMs sourcing supply from the sector and discontinuing in-house
production. During the year we consolidated our position by supplying
production quantities to all the major OEMs thereby providing the platform for
revenue growth in the coming year. We estimate that we currently hold 28% of
our addressable market in filter-based product while our efforts in power
amplifiers give us longer-term potential to achieve similar penetration in this
area, particularly if the performance emphasis we predict comes to pass.
Deliveries of integrated power amplifiers incorporating fully digital interfaces
for signal and control commenced at the end of the first half of the financial
year. This sophisticated product integrates a full transmit and receive radio
function with a multi-carrier power amplifier. Variants of the product are in
development to cover additional frequency bands and higher powers.
During the year, we continued to consolidate production activities in China,
resulting in the closure of filter manufacture in the UK, although final
assembly for the integrated power amplifiers has been retained. The transfer
has been carried out with limited additional capital expenditure, contributing
to profitability and continuing cash generation.
Integrated Products
I am very pleased to welcome Iain Gibson, who joined the division in February
from SELEX Sensors and Airborne Systems (SELEX SAS), formerly BAE SYSTEMS
Avionics and became its CEO in April. Iain brings a wealth of general and
commercial management experience from the defence sector which will continue to
improve the operational performance of this technologically and product diverse
business.
This division engages activities covering the semiconductor and defence and
security sectors and point to point microwave links. Sales in the year grew 26%
(2004 £34.5m to 2005 £43.6m) after excluding the contribution of the electronic
warfare business of Filtronic Solid State, which was sold in December 2003. The
sequential growth rate in sales comparing half-year on half-year during the
financial year was 14% and the comparative half year growth for the second half
of the financial year compared with the same period last financial year was 20%.
Operating loss for the financial year was reduced by £3.5m to £9.9m, split
£5.7m in the first half and £4.2m in the second. This was achieved while adding
staff and upgrading facilities to accommodate high volume output at Newton
Aycliffe to service demands from our strategic customer, R.F. Micro Devices
(RFMD). At the end of the financial year the foundry moved into
round-the-clock, seven-day week production for the first time.
The semiconductor foundry at Newton Aycliffe has now established itself as a
leading source for six-inch gallium arsenide wafers using the pHEMT process. In
April 2005, it started to supply wafers in volume to RFMD for use in front-end
modules for mobile handsets, a world market in excess of 750 million units per
year and growing at 7%.
The defence activities have benefited from the start of production supply of
sub-systems to ITT in the US and continuing production supply to Elettronica of
Italy and EADS of Germany of sub-system assemblies for the Eurofighter Defensive
Aids system. The Eurofighter production will reduce to low level in the coming
year as a major portion of our work fell outside UK national work-share and
will, as a result of the delays to the second tranche, be subsumed into Italy
and Germany. This leaves the US defence and security market as the best
opportunity for our continuing growth in the short term. Consequently, we have
relocated our businesses in the US to support growth and, in June 2005, brought
Filtronic Sigtek into the Integrated Products segment where we intend to focus
on acquiring external business, while formerly it has mainly supported in-house
projects. These moves in the US were accompanied by a management
reorganisation, simplifying the reporting structures and creating a single
management team to lead all our US activities.
Filtronic Broadband provides point-to-point microwave link transceivers to OEM
customers. During the year the customer base was expanded on the basis of new
qualified product which entered production in November 2004 using our gallium
arsenide integrated circuits. This product is selling to three OEMs in
expanding volumes and a further design iteration awaiting qualification uses
more complex multi-function integrated circuits further reducing component
count. The point-to-point radio market is exhibiting strong growth and our
customers are well positioned to benefit. Our technology in this market is
recognised to be superior and we confidently expect an increasing market share.
Handset Products
This division is a market leader in the provision of internal antennas for
mobile handsets, with a market share of about 18%. Sales declined 17% year on
year reflecting lower than anticipated levels of activity in the second half of
the financial year with reduced levels of activity with the division's principal
customer. Antenna volumes in the financial year were 104 million units (2004
121 million units), of which over 50% were manufactured in China. The operating
margin reflected this reduced level of activity and with the impact of the fixed
nature of depreciation on automated lines in Finland, operating margins for the
year reduced to 11% before goodwill amortisation, 7% after goodwill
amortisation.
Central Research and Development
Central Research and Development effort has continued on integrated power
amplifiers leading to a solution of the problem of digitally compensating for
the distortion products of the gallium arsenide multi-carrier base-station
amplifier. This solution lies in the semiconductor technology used and is
compatible with existing digital-predistortion processors. This breakthrough
has led to increased effort on low-cost packaging to achieve an attractive
high-performance module price.
Strategic projects include WiMAX basestation hardware and software and WiMAX
mobile transceiver modules.
In the defence sector, effort was expended on a digital integrated frequency
measurement module to succeed our very successful product range now in
production and on a demonstration 'man-pack' ESM receiver which is being
evaluated by potential customers.
Finance
The business has been financed by bank facilities during the year, and although
covenants were breached, the group's lending banks continued support. These
breaches of covenants resulted in additional finance charges in the year of
approximately £0.5m. The capital repayments of £6m due in the year were met.
After the year end, the bank facilities were amended through new arrangements
with Barclays and ABN AMRO, and they now provide term facilities over the next
five years with no capital repayment due in the financial year ending 31 May
2006. The banks have also reconfirmed the overdraft of £9m until end of July
2006.
The recognition as revenue of the outstanding deferred licence fee from BAE
SYSTEMS (now SELEX SAS) was changed with effect from 1 June 2004 to be equally
spread over the remaining period to 1 May 2008 for which the Filtronic group is
liable to provide supply of product. This has increased the annual revenue
recognition from £0.8m to £2.3m.
Capital expenditure
Capital expenditure in the year was limited to £13.0m (2004 £11.7m), reflecting
additional capacity for Wireless Infrastructure in China and its preparation for
production of integrated power amplifiers, funding of replacement capacity
within Handset Products, and ongoing plant requirements for defence contracts
and high volume compound semiconductor demand in Integrated Products.
Employees
At the end of the financial year the group employed 3,863 people, an increase of
273 (8%) since May 2004. The principal changes were that China increased
employees by 555 people, whilst UK employment reduced by 406 people.
Outlook
Wireless Infrastructure foresees continued overall market growth, estimated to
be approximately 8% to 10%, with potential to gain modest increase in its market
share in filter-based products as a result of the new OEM customers secured
during the year. It expects to maintain historic margins through continuing low
cost manufacturing, before transfer of central research and development costs.
Further growth is expected in integrated power amplifiers. Following market
demand, we are supplying Silicon LDMOS power amplifiers for specific customer
requirements complementing the high performance gallium arsenide amplifiers.
A further lower cost manufacturing site will be established during the year in
Hungary, initially to provide additional capacity for filter production and to
reduce dependence on China as a sole low-cost manufacturing base. The division
will also cease operations in Australia.
Integrated Products is planning rapid turnover growth through the challenging
ramp up of volume semiconductor production for RFMD and supply to additional
volume customers. Filtronic Broadband is moving to volume radio production from
the new business gained in the year ending 31 May 2005. This is beneficial in
sales and profit to the division and also further increases foundry loading.
Growth in defence revenues in the US will be offset by run-down of Eurofighter
production in the UK towards the end of the year. Overall, the division is
expected to reach run rate breakeven in the year ending 31 May 2006, this being
dependent on achieving production targets for the foundry.
Handset Products should see a strong recovery in revenue in the financial year
as projects acquired and product qualified over the past nine months reach
production ramp-up. The longer term outlook is supported by efforts in ceramic
antennas for cellular and non-cellular applications and extruded metal
structures for integrated assemblies.
John Roulston FREng FIEE CEng
Group CEO
1 August 2005
Consolidated Profit and Loss Account
for the year ended 31 May 2005
Restated
2005 2004
note £000 £000
Sales 3, 4 262,865 245,076
Operating profit 3, 4 6,779 4,804
Exceptional profit on disposal of tangible fixed assets 5 2,356 -
Exceptional profit on disposal of business 6 - 4,842
Net interest payable and similar charges 7 (4,104) (5,550)
Currency exchange gains/(losses) 8 522 (644)
Exceptional loss on repayment of debt 9 - (2,498)
(3,582) (8,692)
Profit on ordinary activities before taxation 5,553 954
Taxation on profit on ordinary activities 10 (241) (2,730)
Profit/(loss) on ordinary activities after taxation 5,312 (1,776)
Dividends 11 (2,021) (2,015)
Retained profit/(deficit) for the year 3,291 (3,791)
Earnings/(loss) per share
Basic 12 7.10p (2.38)p
Diluted 12 7.09p (2.38)p
Dividend per share 11 2.70p 2.70p
All the results relate to continuing operations.
Consolidated Balance Sheet
for the year ended 31 May 2005
2005 2004
£000 £000
Fixed assets
Intangible assets 29,195 30,902
Tangible assets 79,793 86,300
108,988 117,202
Current assets
Stocks 34,802 36,618
Debtors 67,924 54,480
Deferred tax asset 2,309 -
Cash at bank and in hand 6,563 2,070
111,598 93,168
Creditors: amounts falling due within one year 70,417 51,767
Net current assets 41,181 41,401
Total assets less current liabilities 150,169 158,603
Creditors: amounts falling due after one year 33,000 44,000
Provision for deferred tax 661 582
Deferred income 10,730 12,908
Net assets 105,778 101,113
Capital and reserves
Called up share capital 7,484 7,465
Share premium account 139,172 137,641
Shares to be issued - 2,255
Revaluation reserve 106 106
Other reserve 5,584 2,020
Profit and loss account (46,568) (48,374)
Equity shareholders' funds 105,778 101,113
Consolidated Cash Flow Statement
for the year ended 31 May 2005
Restated
2005 2004
note £000 £000
Net cash flow from operating activities A 19,595 16,951
Returns on investment and servicing of finance
Interest received 85 95
Interest paid (4,189) (4,852)
Bank loan arrangement fee paid - (500)
Premium paid on repayment of debt - (1,517)
Net cash flow from returns on investment and servicing of (4,104) (6,774)
finance
Tax paid (1,846) (2,811)
Capital expenditure
Purchase of tangible fixed assets (12,963) (11,718)
Sale of tangible fixed assets 1,555 305
Exceptional sale of tangible fixed assets (note 5) 6,349 -
Government grants received 1,000 1,297
Government grants repaid (150) -
Net cash flow from capital expenditure (4,209) (10,116)
Disposals (note 6)
Cash consideration received - 6,970
Disposal costs paid - (471)
Net cash flow from disposals - 6,499
Equity dividends paid (2,018) (2,008)
Net cash flow before financing 7,418 1,741
Financing
Issue of shares - 275
Loans taken out - 60,000
Loans repaid (6,000) (66,947)
Net cash flow from financing (6,000) (6,672)
Increase/(decrease) in cash B 1,418 (4,931)
Notes to the Consolidated Cash Flow Statement
for the year ended 31 May 2005
A Reconciliation of operating profit to net cash flow from operating activities
Restated
2005 2004
£000 £000
Operating profit 6,779 4,804
Goodwill amortisation 2,222 2,256
Share compensation 43 232
Depreciation 14,572 17,542
Profit on disposal of tangible fixed assets (235) (44)
Licence fee released (2,335) (789)
Government grants released (693) (743)
Movement in stocks 2,107 (4,901)
Movement in debtors (13,249) (7,541)
Movement in creditors 10,384 6,135
Net cash flow from operating activities 19,595 16,951
B Reconciliation of net cash flow to movement in net debt
Restated
2005 2004
£000 £000
Increase/(decrease) in cash 1,418 (4,931)
Cash flow from debt 6,000 6,947
Change in net debt from cash flows 7,418 2,016
Non-cash movement - (1,274)
Currency exchange movement 486 3,379
Movement in net debt 7,904 4,121
Opening net debt (51,299) (55,420)
Closing net debt (43,395) (51,299)
C Analysis of movement in net debt
At Currency At
1 June Cash exchange 31 May
2004 flow movement 2005
£000 £000 £000 £000
Cash at bank and in hand 2,070 4,007 486 6,563
Bank overdraft (3,369) (2,589) - (5,958)
Net (overdraft)/cash (1,299) 1,418 486 605
Loans due within one year (6,000) (5,000) - (11,000)
Loans due after one year (44,000) 11,000 - (33,000)
Loans (50,000) 6,000 - (44,000)
Net debt (51,299) 7,418 486 (43,395)
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 31 May 2005
Restated
2005 2004
£000 £000
Profit/(loss) on ordinary activities after taxation 5,312 (1,776)
Currency exchange movement arising on consolidation 1,331 (9,011)
Currency exchange movement on loan - 4,249
Total recognised gains and losses for the year 6,643 (6,538)
Consolidated Reconciliation of Shareholders' Funds
for the year ended 31 May 2005
Restated
2005 2004
£000 £000
Profit/(loss) on ordinary activities after taxation 5,312 (1,776)
Dividends (2,021) (2,015)
Profit retained/(deficit) for the year 3,291 (3,791)
Currency exchange movement arising on consolidation 1,331 (9,011)
Currency exchange movement on loan - 4,249
Issue of shares 2,298 2,573
Shares to be issued - shares issued (2,298) (2,298)
Shares to be issued - share compensation 43 232
Movement in shareholders' funds 4,665 (8,046)
Opening shareholders' funds 101,113 109,159
Closing shareholders' funds 105,778 101,113
Notes
1 Basis of preparation
The financial information set out here in does not constitute the company's
statutory accounts for the years ended 31 May 2005 or 31 May 2004. Statutory
accounts for 2004 have been delivered to the Registrar of Companies, and those
for 2005 will be delivered following the company's annual general meeting. The
auditors have reported on those accounts; their reports were unqualified and did
not contain statements under section 237 (2) or (3) of the Companies Act 1985.
Financial position and market conditions
The group is currently experiencing increases in demand across its operating
divisions from both existing and new customers in the Wireless Infrastructure,
arising from new product allocations from the principal customer in the Handset
Products division and from the active ramp up of volume semiconductors supply
within the Integrated Products division, as discussed in the Group CEO's
Operating Review.
Global markets, particular the technology and telecoms sector, continue to
experience a high degree of volatility. It remains difficult to predict total
volumes and timing with certainty. Securing lower costs of production, through
greater output from the group's Chinese facilities and commencement of
activities in Hungary and other cost reduction programmes remain important
areas. In addition, the foundry at Newton Aycliffe is required to operate
successfully to meet the substantial increases in the volume of semiconductor
wafers it is expected to produce to meet current and ongoing customer demand.
This is critical to ensuring its expected contribution to the group.
The Board has built all of these circumstances into their working capital
forecasts and has modelled various business scenarios, including both retention
and disposal of the Handset Products division. The Board has recognised the
uncertainties referred to above and taken into account the support received from
the banks providing the rescheduled debt facilities, including the renewal of
the group's overdraft facility of £9,000,000 until 31 July 2006.
Thus the Board has concluded, based on these scenarios, that the group's funding
remains adequate and therefore that it is appropriate for the financial
statements to be prepared on a going concern basis.
Notes
2 Change of accounting policy
The accounting policy for the translation of the profit and loss accounts and
cash flow statements of overseas subsidiaries has been changed. Under the
previous policy, the profit and loss accounts and cash flow statements of the
overseas subsidiaries were translated at the rate of exchange ruling at the
balance sheet date. From 1 June 2004 the profit and loss accounts and cash flow
statements of the overseas subsidiaries are translated at the average rate of
exchange for the year. The balance sheets of the overseas subsidiaries continue
to be translated at the rate of exchange ruling at the balance sheet date. The
directors consider that the revised accounting policy provides a fairer view of
the group's results as a significant proportion of the group's operations are
overseas.
The results for the year ended 31 May 2004 have been restated using the revised
accounting policy. There is no change to the consolidated balance sheet at 31
May 2004. The effect of the change in accounting policy on the results for the
year ended 31 May 2004 is as follows:
As previously Prior year
reported adjustment
Restated
2004 2004 2004
£000 £000 £000
Sales 237,203 7,873 245,076
Operating profit 3,707 1,097 4,804
(Loss)/profit on ordinary activities before (409) 1,363 954
taxation
Loss on ordinary activities after taxation (3,007) 1,231 (1,776)
Currency exchange movement arising on (7,780) (1,231) (9,011)
consolidation
Notes
3 Geographical origin segment analysis
Restated
2005 2004
£000 £000
Sales
United Kingdom 106,447 92,486
Finland 54,434 63,479
United States of America 65,880 52,523
Australia 4,300 4,982
China 86,988 50,887
Inter segment (55,184) (19,281)
262,865 245,076
Operating profit
United Kingdom (23,082) (15,896)
Finland (1,841) 2,216
United States of America 9,356 2,963
Australia (2,329) (1,418)
China 24,675 16,939
6,779 4,804
Operating profit is after charging goodwill amortisation:
Finland 2,028 2,046
United States of America 194 210
2,222 2,256
Notes
4 Business segment analysis
Restated
2005 2004
£00 £000
Sales
Wireless Infrastructure 168,425 145,219
Handset Products 49,974 60,154
Integrated Products 43,593 38,450
Central Services 3,575 3,857
Inter segment (2,702) (2,604)
262,865 245,076
Operating profit
Wireless Infrastructure 18,062 10,753
Handset Products 3,589 11,180
Integrated Products (9,857) (13,392)
Central Services (5,015) (3,737)
6,779 4,804
Operating profit is after charging goodwill amortisation:
Handset Products 2,028 2,046
Integrated Products 194 210
2,222 2,256
Notes
5 Exceptional profit on disposal of tangible fixed assets
During the year two freehold properties were sold:
2005 2004
£000 £000
Disposal proceeds 6,349 -
Cost 4,821 -
Depreciation (828) -
Net book value 3,993 -
Exceptional profit on disposal of tangible fixed assets 2,356 -
6,349 -
6 Exceptional profit on disposal of business
On 31 December 2003 the electronic warfare business of Filtronic Solid State was sold. The
disposal is analysed as follows:
2005 Restated
£000 2004
£000
Consideration
Cash - 6,970
Disposal costs - (471)
- 6,499
Net assets disposed
Tangible fixed assets - 864
Stocks - 535
Debtors - 677
Creditors - (419)
- 1,657
Exceptional profit on disposal of business - 4,842
- 6,499
The electronic warfare business of Filtronic Solid State was located in the United States of
America and formed part of the Integrated Products business segment. For the seven months up to
its disposal on 31 December 2003 the disposed business had sales of £3,891,000 resulting in an
operating loss of £36,000.
Notes
7 Net interest payable and similar charges 2005 2004
£000 £000
Interest receivable
Interest on bank deposits 85 95
Interest payable and similar charges
Interest on bank borrowings (4,189) (1,233)
Interest on other loans - (3,619)
Bank loan arrangement fee - (500)
Debt issues costs - amortisation - (293)
(4,189) (5,645)
Net interest payable and similar charges (4,104) (5,550)
8 Currency exchange gains/(losses) Restated
2005 2004
£000 £000
Currency exchange gains/(losses) 522 (2,664)
Currency exchange gain on loan - 2,020
522 (644)
9 Exceptional loss on repayment of debt 2005 2004
£000 £000
Premium paid on repayment of debt - (1,517)
Debt issue costs written off on repayment of debt - (981)
- (2,498)
Notes
10 Taxation on profit on ordinary activities Restated
2005 2004
£000 £000
Current tax
United Kingdom 11 27
Overseas 2,424 2,820
2,435 2,847
Deferred tax
Overseas origination and reversal of timing differences (2,194) (117)
241 2,730
The current tax charge for the year arises primarily from the group's operations in China and
Finland, where taxable profits cannot be relieved by losses available in other jurisdictions.
The deferred tax credit arises from the group's operations in the United States of America,
where a proportion of deferred tax assets relating to tax losses carried forward have been
recognised.
The exceptional items had no effect on the taxation charge.
11 Dividends
2005 per 2004 2005 2004
share per £000 £000
share
Interim dividend - paid 0.90p 0.90p 674 671
Final dividend - proposed 1.80p 1.80p 1,347 1,344
2.70p 2.70p 2,021 2,015
12 Earnings/(loss) per share Restated
2005 2004
£000 £000
Profit/(loss) on ordinary activities after taxation 5,312 (1,776)
000 000
Weighted average number of shares in issue 74,797 74,508
Dilution effect of share options 84 -
Dilution effect of contingently issuable shares 45 -
Diluted weighted average number of shares 74,926 74,508
Basic earnings/(loss) per share 7.10p (2.38)p
Diluted earnings/(loss) per share 7.09p (2.38)p
This information is provided by RNS
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