Interim Results

Intertek Group PLC 06 September 2004 INTERIM 2004 RESULTS ANNOUNCEMENT 6 September 2004 Intertek Group plc ('Intertek'), the global testing, inspection and certification company, today announces its interim results for the half year to 30 June 2004. FINANCIAL HIGHLIGHTS and the comparison with the same period last year Turnover £237.8m Up 3.7% at actual exchange rates Up 12.4% at constant exchange rates Operating profit (1) £40.1m Up 6.4% at actual exchange rates Up 18.3% at constant exchange rates Operating margin (1) 16.9% Up from 16.4% Operating cash flow £39.4m Up 18.7% from £33.2m Profit before tax (2) £37.2m Up 14.5% from £32.5m Earnings per share (3) 16.6p Up 19.4% from 13.9p Basic earnings per share 16.2p Up 18.2% from 13.7p (17.0p including exceptional income) Interim dividend per share 3.4p Up 17.2% from 2.9p 1 before goodwill amortisation and exceptional income and including profits from associates 2 before exceptional income of £4.7m in 2003 3 diluted underlying earnings per share CHIEF EXECUTIVE OFFICER, RICHARD NELSON commented: We have seen a strong performance from all four divisions and we were pleased with the Group's growth of operating profit and turnover at both actual and constant exchange rates. Labtest continued to grow its turnover, operating profit and margins with most of this improvement in Asia. The steps we have taken to improve performance in Caleb Brett and ETL SEMKO are bearing fruit. FTS's performance benefited from the contribution of the Venezuela contract. Our strong competitive position and focus on growth markets will enable us to produce continuing good results. We also aim to make further acquisitions. We are confident in our prospects for the year and the future, and reflecting this confidence we have declared an interim dividend of 3.4p per share, an increase of 17.2% over last year. ANALYSTS' MEETING There will be a meeting for analysts at 9.30am today at Goldman Sachs International, Peterborough Court, 133 Fleet Street, London EC4A 2BB. A copy of the presentation will be available on the website later today. CONTACT Richard Nelson, Chief Executive Officer Bill Spencer, Chief Financial Officer Aston Swift, Treasurer and Investor Relations Telephone: +44 (0) 20 7396 3400 aston.swift@intertek.com Katie Macdonald-Smith, Tulchan Communications Telephone: +44 (0) 20 7353 4200 kmacdonald-smith@tulchangroup.com Corporate website: www.intertek.com High resolution images of Intertek Group plc businesses are available to download, free of charge from www.vismedia.co.uk. ABOUT INTERTEK Intertek is a leading international testing, inspection and certification organisation which assesses customers' products and commodities against a wide range of safety, regulatory, quality and performance standards and, certifies the management systems of customers. Intertek has 283 laboratories with 12,900 people around the world and is increasingly undertaking outsourced testing work for its customers. Chairman's statement RESULTS OVERVIEW On behalf of the Board, I am pleased to announce an excellent set of results for the first six months of 2004. At constant exchange rates, compared with the same period last year, turnover grew 12.4% and operating profit before goodwill amortisation and exceptional items grew 18.3%. Excluding acquisitions and disposals, the organic growth of turnover and operating profit was 11.1% and 16.7% respectively. Approximately 80% of the Group's earnings are in US dollars or related currencies. Despite the US dollar being 13% weaker in the first half of 2004 than the first half of 2003, at actual exchange rates turnover increased 3.7% and operating profit increased 6.4% over the same period last year. NEW BUSINESS In line with the Group's growth objectives, a number of acquisitions were completed during the period. The two largest are detailed below. On 10 May 2004, the Group acquired 100% of the share capital of Entela Inc, a US automotive components testing company, for £16.3m. Entela's strength in the automotive market, both in electrical and electronic automotive parts testing and systems certification will complement the existing ETL SEMKO businesses. On 14 May 2004, Avecia Limited outsourced its expert analytical testing requirements to Caleb Brett. As part of the agreement, Intertek acquired the assets and employed the management and scientists of Avecia's Analytical Science Group which is based in Manchester in the UK for £4.3m. ASG is a world-class laboratory for the analysis and characterisation of chemicals. We plan to continue making acquisitions to complement our existing businesses. DIVIDENDS The Board has declared an interim dividend of 3.4p (2003: 2.9p), an increase of 17.2% over last year. The interim dividend payment will be made on 16 November 2004, to members on the register at 5 November 2004. BOARD APPOINNT I would like to welcome Raymond Kong, who was appointed to the Board of Intertek Group plc on 14 May 2004. Raymond has been with the Group for over 30 years and is the President of the Group's businesses in Asia and China. ACCOUNTING STANDARDS The Group will adopt International Financial Reporting Standards on 1 January 2005. The Group is considering the potential impact on the consolidated financial statements of the adoption of IFRS and although the actual impact will depend on the standards applicable and the particular circumstances prevailing on adoption of IFRS, the Group does not expect there to be a material impact on the financial results of the Group. LOOKING AHEAD We expect a good outcome for the year and we feel confident in the continuing growth of the businesses and the Group's ability to generate strong operating cash flow. Vanni Treves Chairman Chief Executive Officer's review OVERVIEW Turnover for the Group for the first half of 2004 was £237.8m, an increase of 12.4% over the first half of 2003 at constant exchange rates. At actual exchange rates, turnover grew by 3.7%, reflecting a 13% decline in the value of the US dollar against sterling. Strong turnover growth was achieved in Labtest, ETL SEMKO and FTS which all delivered more than 12% growth over the first half of last year at constant rates. Turnover in Caleb Brett increased by 9.8% in a market that has improved compared to last year. Total operating profit before goodwill amortisation and exceptional items, improved by £6.2m to £40.1m, an increase of 18.3% at constant exchange rates. Excluding acquisitions and disposals, organic growth was 16.7%. At actual exchange rates, operating profit grew by 6.4% over the first half of last year. Operating margins improved in the three major divisions, due to improved efficiency and a lower cost base following the restructuring of Caleb Brett and ETL SEMKO last year. The Group's profit margin increased from 16.4% to 16.9%. The performance of each of the divisions is shown below at constant exchange rates with an adjustment to actual exchange rates. -------------------------------------------------------------------------------- Turnover Operating profit (1) -------------------------------------------------------------------------------- Six months to 30 June 2004 2003 Change 2004 2003 Change £m £m % £m £m % -------------------------------------------------------------------------------- At constant exchange rates (2) By division: -------------------------------------------------------------------------------- Labtest 64.0 57.0 12.3 21.5 18.6 15.6 -------------------------------------------------------------------------------- Caleb Brett 85.1 77.5 9.8 7.7 5.5 40.0 -------------------------------------------------------------------------------- ETL SEMKO 58.4 50.7 15.2 9.1 6.8 33.8 -------------------------------------------------------------------------------- Foreign Trade Standards 30.3 26.4 14.8 5.1 5.9 (13.6) -------------------------------------------------------------------------------- Central overheads - - - (3.3) (2.9) (13.8) -------------------------------------------------------------------------------- Total at constant exchange rates 237.8 211.6 12.4 40.1 33.9 18.3 -------------------------------------------------------------------------------- Exchange rate adjustment - 17.8 - - 3.8 - -------------------------------------------------------------------------------- Total at actual average exchange rates (3) 237.8 229.4 3.7 40.1 37.7 6.4 -------------------------------------------------------------------------------- 1. operating profit includes the results of associates and is stated before goodwill amortisation of £0.7m (2003: £0.5m) and net exceptional income of £0.1m in 2003 2. cumulative average exchange rates for the six months to 30 June 2004 3. see note 2 to the Interim report PROFITABILITY Profit on ordinary activities before tax was £37.2m, up 14.5% over the first half of last year, without taking into account net exceptional income before tax of £4.7m in 2003. The charge for net interest was £2.2m in the first half of 2004, compared to £4.7m in the first half of last year, due to reduced interest rates and higher cash on deposit. Interest rates increased towards the end of the first half of 2004 and cash on deposit was reduced due to acquisitions. The tax rate of 26.6% for the first half of 2004 was based on the estimated tax rate the Group expects for the full year. Profit for the period before dividends was £25.0m, up 19.0%, before exceptional items. The Board has declared a dividend of 3.4p per share (interim 2003: 2.9p) which equates to £5.2m (2003 £4.5m). Retained profit for the period was £19.8m compared to £21.6m in the first half of 2003. CASH FLOW Cash from operations was £39.4m up 18.7% on the first half of last year. This was used to fund net investment in fixed assets of £8.1m (2003: £9.1m), acquisitions of £19.9m (2003: £nil), interest and finance charges of £2.0m (2003: £4.3m), dividend payments to minority shareholders of £2.2m (2003: £1.3m), tax of £6.1m (2003: £6.1m) and dividends of £9.1m (2003: £8.0m). The Group repaid borrowings of £8.8m (2003: £8.2m) and issued shares of £0.8m (2003: £0.1m). As a result, Group net debt increased from £132.2m to £133.1m (see note 10 to the Interim report). SHAREHOLDERS' FUNDS Shareholders' funds improved by £24.3m in the period from 31 December 2003 and showed a deficit of £18.8m at 30 June 2004. The deficit is due to a large negative profit and loss reserve in the consolidated Group accounts. This is mainly due to goodwill of £235.2m being written off to reserves before 1998 in accordance with the accounting standard applicable at that time. This goodwill arose primarily from the acquisition of Intertek Testing Services Limited from Inchcape plc in 1996. The negative consolidated reserves do not impact the ability of the Company to pay dividends in the future. DIVISIONAL REVIEW In the divisional review that follows, the figures are stated at the cumulative average exchange rates for the six months to 30 June 2004. LABTEST -------------------------------------------------------------------------------- Six months to 30 June 2004 2003 Change £m £m % -------------------------------------------------------------------------------- Turnover 64.0 57.0 12.3 -------------------------------------------------------------------------------- Operating profit 21.5 18.6 15.6 -------------------------------------------------------------------------------- Operating margin 33.6% 32.6% -------------------------------------------------------------------------------- Labtest continued to grow very well, with turnover and operating profit increasing by 12.3% and 15.6% respectively. Most of the expansion was in Asia where the key growth drivers remain strong, principally the sourcing of products from Asia, the wide range of products being sold by retailers, shorter product lifecycles and the demand for quality and safety. Excluding the results of small acquisitions made at the end of 2003 and in 2004, and a business sold in May 2003, on a like for like basis, Labtest's turnover grew by 13.4% and operating profit grew by 14.8% at constant rates. Labtest plans to continue making infill acquisitions to consolidate its market leading position and expand into new territories and product lines. The division's profit margin increased from 32.6% to 33.6%, principally due to continued operational improvements in Hong Kong and growth in China. CALEB BRETT -------------------------------------------------------------------------------- Six months to 30 June 2004 2003 Change £m £m % -------------------------------------------------------------------------------- Turnover 85.1 77.5 9.8 -------------------------------------------------------------------------------- Operating profit 7.7 5.5 40.0 -------------------------------------------------------------------------------- Operating margin 9.0% 7.1% -------------------------------------------------------------------------------- Caleb Brett's turnover increased by 9.8% and operating profit increased by 40.0%. Turnover in the cargo inspection and testing business, which accounts for 72% of the division's turnover, grew by 5.4%. Growth in this market remains slow although there are improved trading conditions caused by a high demand for petroleum products in the United States. A key growth area is outsourcing which now accounts for 28% of the division's turnover, up from 25% in the first half of last year. Outsourcing turnover grew by 23.0% in the first half of 2004 compared to the same period last year. In May 2004, Avecia Limited outsourced its Analytical Science Group in the UK to Caleb Brett. This is expected to generate annual turnover of about £3.6m. The growth in the operating margin of this division from 7.1% to 9.0% was attributable both to the growth in outsourcing and the reduced cost base in the cargo inspection and testing business which resulted from the restructuring which took place in the first half of 2003. ETL SEMKO -------------------------------------------------------------------------------- Six months to 30 June 2004 2003 Change £m £m % -------------------------------------------------------------------------------- Turnover 58.4 50.7 15.2 -------------------------------------------------------------------------------- Operating profit 9.1 6.8 33.8 -------------------------------------------------------------------------------- Operating margin 15.6% 13.4% -------------------------------------------------------------------------------- ETL SEMKO's turnover increased by 15.2% and operating profit increased by 33.8%. Asia continued to perform strongly, particularly in the safety testing of household appliances manufactured in China for export. The Americas also performed well, with organic growth supplemented by the acquisition of Entela in the United States. Excluding the results of acquisitions, turnover grew 8.9% and operating profit grew 27.9%. The sales team in the United States has been successful in persuading the major retailers to accept the ETL safety label. ETL SEMKO has traditionally had a very small share of the market in the United States for the safety testing and labelling of electrical products sold by retailers, but it is now able to compete aggressively in this market. The growth in the operating margin from 13.4% to 15.6% was due to both the reduced cost base which resulted from the restructuring which took place in the second half of 2003, and the growth in Asia where the profit margin is higher than in the West. FOREIGN TRADE STANDARDS -------------------------------------------------------------------------------- Six months to 30 June 2004 2003 Change £m £m % -------------------------------------------------------------------------------- Turnover 30.3 26.4 14.8 -------------------------------------------------------------------------------- Operating profit 5.1 5.9 (13.6) -------------------------------------------------------------------------------- Operating margin 16.8% 22.3% -------------------------------------------------------------------------------- FTS's turnover increased by 14.8% mainly due to the new contract in Venezuela which commenced operating in the second half of 2003. The decline in the operating margin to 16.8% was due to the release of bad debt provisions in the first half of last year. OUTLOOK Our operations are performing strongly and we see an increasing demand for safety and quality assurance, especially when goods and commodities are sourced from developing countries. We have the management and the operational and financial resources to benefit from the exciting opportunities in our business, which include the increased sourcing of goods from Asia, the growing acceptance by the American retailers of our ETL safety label, our new automotive component testing business and the growing trend for oil and chemical companies to outsource their testing. In light of these trends, with our extensive worldwide network of laboratories and offices and our well established client base, we are confident in our prospects for the year and for the future. Richard Nelson Chief Executive Officer Group profit and loss account ------------------------------------------------------------------------------------------------------------------------ Six months to 30 June 2004 Six months to 30 June 2003 Year to 31 December 2003 (Unaudited) (Unaudited) (Audited) ------------------------------------------------------------------------------------------------------------------------ Pre Pre except- Except- except- Except- ional ional ional ional Total items items Total items items Total Notes £m £m £m £m £m £m £m ------------------------------------------------------------------------------------------------------------------------ Turnover 2 237.8 229.4 - 229.4 471.1 - 471.1 ------------------------------------------------------------------------------------------------------------------------ Operating profit before amortisation 39.5 37.1 0.1 37.2 75.0 (1.1) 73.9 Goodwill amortisation 2 (0.7) (0.5) - (0.5) (1.0) - (1.0) ------------------------------------------------------------------------------------------------------------------------ Group operating profit 38.8 36.6 0.1 36.7 74.0 (1.1) 72.9 Share of operating profits of associates 0.6 0.6 - 0.6 1.2 - 1.2 ------------------------------------------------------------------------------------------------------------------------ Total operating profit 2 39.4 37.2 0.1 37.3 75.2 (1.1) 74.1 ------------------------------------------------------------------------------------------------------------------------ Continuing operations 39.4 37.2 4.7 41.9 75.2 3.4 78.6 Discontinued operations - - 1.2 1.2 - 2.6 2.6 ------------------------------------------------------------------------------------------------------------------------ Net profit on disposal of businesses - - 4.6 4.6 - 4.5 4.5 ------------------------------------------------------------------------------------------------------------------------ Profit on ordinary activities before interest 39.4 37.2 4.7 41.9 75.2 3.4 78.6 Net interest and similar charges (2.2) (4.7) - (4.7) (8.0) - (8.0) ------------------------------------------------------------------------------------------------------------------------ Profit on ordinary activities before taxation 37.2 32.5 4.7 37.2 67.2 3.4 70.6 Taxation on profit on ordinary activities 3 (9.9) (9.6) 0.4 (9.2) (18.7) (0.1) (18.8) ------------------------------------------------------------------------------------------------------------------------ Profit on ordinary activities after taxation 27.3 22.9 5.1 28.0 48.5 3.3 51.8 Equity minority interest (2.3) (1.9) - (1.9) (3.7) - (3.7) ------------------------------------------------------------------------------------------------------------------------ Profit for the period 25.0 21.0 5.1 26.1 44.8 3.3 48.1 Dividends 4 (5.2) (4.5) - (4.5) (13.6) - (13.6) ------------------------------------------------------------------------------------------------------------------------ Retained profit for the period 19.8 16.5 5.1 21.6 31.2 3.3 34.5 ------------------------------------------------------------------------------------------------------------------------ Earnings per share 5 ------------------------------------------------------------------------------------------------------------------------ Basic 16.2p 13.7p 3.3p 17.0p 29.1p 2.2p 31.3p ------------------------------------------------------------------------------------------------------------------------ Diluted 16.1p 13.6p 3.3p 16.9p 29.0p 2.1p 31.1p ------------------------------------------------------------------------------------------------------------------------ Group balance sheet At 30 June At 30 June At 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) Notes £m £m £m ---------------------------------------------------------------------------------------------- Fixed assets Intangible assets - goodwill 33.0 11.6 17.8 Tangible assets 78.7 75.5 77.8 Investments 1.5 1.4 1.2 ---------------------------------------------------------------------------------------------- 113.2 88.5 96.8 ---------------------------------------------------------------------------------------------- Current assets Stocks 1.6 1.4 1.4 Debtors 111.5 104.7 105.3 Cash at bank and in hand 64.0 72.5 81.5 ---------------------------------------------------------------------------------------------- 177.1 178.6 188.2 Creditors due within one year -------------------------------------- Borrowings (21.5) (15.7) (17.5) Other creditors (94.4) (82.9) (92.1) -------------------------------------- (115.9) (98.6) (109.6) ---------------------------------------------------------------------------------------------- Net current assets 61.2 80.0 78.6 ---------------------------------------------------------------------------------------------- Total assets less current liabilities 174.4 168.5 175.4 Creditors due after more than one year -------------------------------------- Borrowings (175.6) (208.8) (196.2) Other creditors (0.4) (1.4) (1.4) -------------------------------------- (176.0) (210.2) (197.6) Provisions for liabilities and charges (5.4) (8.6) (8.6) ---------------------------------------------------------------------------------------------- Net liabilities excluding pension liabilities (7.0) (50.3) (30.8) Pension schemes with net liabilities 6 (5.1) (7.4) (5.1) ---------------------------------------------------------------------------------------------- Net liabilities (12.1) (57.7) (35.9) ---------------------------------------------------------------------------------------------- Capital and reserves Called up share capital 8 1.5 1.5 1.5 Share premium and other reserves 8 240.6 238.1 238.5 Profit and loss account 8 (260.9) (304.2) (283.1) ---------------------------------------------------------------------------------------------- Equity shareholders' deficit (18.8) (64.6) (43.1) Equity minority interest 6.7 6.9 7.2 ---------------------------------------------------------------------------------------------- Capital employed (12.1) (57.7) (35.9) ---------------------------------------------------------------------------------------------- Group cash flow Six months to Six months to Year to Notes 30 June 30 June 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) £m £m £m ------------------------------------------------------------------------------------------------ Net cash inflow from operating activities 9 39.4 33.2 80.0 Dividends received from associate undertakings - - 0.7 Returns on investments and servicing of finance (4.2) (5.6) (10.1) Taxation (6.1) (6.1) (13.7) Capital expenditure and financial investment (8.1) (9.1) (23.6) Acquisitions and disposals: Cash outflow from acquisitions 7 (19.9) - (7.8) Cash inflow from disposals - 6.6 6.6 Equity dividends paid (9.1) (8.0) (12.5) ------------------------------------------------------------------------------------------------ Cash (outflow)/inflow before financing (8.0) 11.0 19.6 Financing: Net issue of shares 0.8 0.1 (0.1) Decrease in debt (8.8) (8.2) (6.8) ------------------------------------------------------------------------------------------------ (Decrease)/increase in cash in the period 10 (16.0) 2.9 12.7 ------------------------------------------------------------------------------------------------ Reconciliation of net cash flow to movement in net debt Six months to Six months to Year to Notes 30 June 30 June 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) £m £m £m ----------------------------------------------------------------------------------------------------------------- (Decrease)/increase in cash in the period (16.0) 2.9 12.7 Decrease in debt 8.8 8.2 6.8 ----------------------------------------------------------------------------------------------------------------- (Increase)/decrease in net debt resulting from cash flows (7.2) 11.1 19.5 Acquisitions and disposals - (0.2) 0.5 Other non cash movements (0.4) (0.5) (1.0) Exchange adjustments 6.7 4.5 15.7 ----------------------------------------------------------------------------------------------------------------- (Increase)/decrease in net debt in the period 10 (0.9) 14.9 34.7 Net debt at the start of the period (132.2) (166.9) (166.9) ----------------------------------------------------------------------------------------------------------------- Net debt at the end of the period (133.1) (152.0) (132.2) ----------------------------------------------------------------------------------------------------------------- Statement of total group recognised gains and losses Six months to Six months to Year to 30 June 30 June 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) £m £m £m -------------------------------------------------------------------------------------------------------- Net profit from group companies 24.6 25.7 47.3 Net profit from associates 0.4 0.4 0.8 -------------------------------------------------------------------------------------------------------- Profit for the financial period 25.0 26.1 48.1 Actuarial pension gain* - - 1.6 Exchange adjustments 2.4 3.6 10.2 -------------------------------------------------------------------------------------------------------- Total recognised gains and losses relating to the period 27.4 29.7 59.9 -------------------------------------------------------------------------------------------------------- *actuarial pension gain is stated net of deferred tax Reconciliation of movements in shareholders' deficit Six months to Six months to Year to 30 June 30 June 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) £m £m £m ------------------------------------------------------------------------------- Opening shareholders' deficit (43.0) (90.5) (90.5) Restatement (note 8) (0.1) (0.1) (0.1) ------------------------------------------------------------------------------- Restated shareholders' deficit (43.1) (90.6) (90.6) Issue of ordinary shares 2.1 0.1 0.5 Profit for the period 25.0 26.1 48.1 Dividends (5.2) (4.5) (13.6) Goodwill on disposals - 0.7 0.7 Actuarial pension gain* - - 1.6 Exchange adjustments 2.4 3.6 10.2 ------------------------------------------------------------------------------- Closing shareholders' deficit (18.8) (64.6) (43.1) ------------------------------------------------------------------------------- *actuarial pension gain is stated net of deferred tax Included in shareholders' deficit is £235.2m (30 June 2003: £256.3m, 31 December 2003: £244.1m) relating to goodwill written off to reserves in relation to the acquisition of subsidiaries prior to 1 January 1998. Historical cost profits and losses A note of consolidated historical cost profits and losses is not presented as there is no material difference between the profits of the Group as shown in this interim financial information and those shown on a historical cost basis. Notes to the interim report for the six months to 30 June 2004 1. BASIS OF PREPARATION This interim financial information has been prepared on the basis of the accounting policies set out in the statutory accounts of Intertek Group plc for the year ended 31 December 2003, except for the matter referred to below, and does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. During the period, the Group adopted the requirements of UITF 38: Accounting for ESOP Trusts, and therefore the Group's investment in its own shares of £0.1m, which is held in an Employee Share Ownership Trust (ESOT), is reported as a deduction from shareholders' funds. Previously this was reported as an investment. The balance sheets at 30 June 2003 and 31 December 2003, have been restated to reflect this change in presentation. The results for the six months to 30 June 2004 and 30 June 2003, have not been audited but have been reviewed by KPMG Audit Plc, the Company's auditors. The results for the year ended 31 December 2003, have been abridged from the Group's financial statements, which have been reported on by the Group's auditors and filed with 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. 2. SEGMENTAL ANALYSIS BY DIVISION Six months to Six months to Year to 30 June 30 June 31 December 2004 2003 2003 (restated)* Turnover £m £m £m ------------------------------------------------------------------------------- Labtest 64.0 63.2 130.8 Caleb Brett 85.1 83.3 169.6 ETL SEMKO 58.4 55.4 111.6 Foreign Trade Standards 30.3 27.5 59.1 ------------------------------------------------------------------------------- Total continuing operations 237.8 229.4 471.1 ------------------------------------------------------------------------------- Total operating profit ------------------------------------------------------------------------------- Labtest 21.5 20.8 42.8 Caleb Brett 7.7 6.2 13.2 ETL SEMKO 9.1 7.5 14.2 Foreign Trade Standards 5.1 6.1 11.9 Central overheads (3.3) (2.9) (5.9) ------------------------------------------------------------------------------- Total continuing operations 40.1 37.7 76.2 Goodwill amortisation (0.7) (0.5) (1.0) ------------------------------------------------------------------------------- Total before operating exceptional items 39.4 37.2 75.2 Operating exceptional items - continuing - (1.1) (3.7) ------------------------------------------------------------------------------- Continuing operations 39.4 36.1 71.5 Operating items - discontinued - 1.2 2.6 Non operating exceptional items - 4.6 4.5 ------------------------------------------------------------------------------- Total 39.4 41.9 78.6 ------------------------------------------------------------------------------- *In 2003, inspection of electrical and electronic goods was transferred from Labtest to ETL SEMKO. Turnover for this transferred business for the period to 30 June 2003 was £3.3m and operating profit was £1.5m. The figures for this period have been restated. 2. SEGMENTAL ANALYSIS CONTINUED BY DIVISION Six months to Six months to Year to 30 June 30 June 31 December 2004 2003 2003 Goodwill amortisation £m £m £m ------------------------------------------------------------------------------- Labtest 0.2 - 0.1 Caleb Brett 0.3 0.3 0.6 ETL SEMKO 0.2 0.1 0.2 Foreign Trade Standards - 0.1 0.1 ------------------------------------------------------------------------------- 0.7 0.5 1.0 ------------------------------------------------------------------------------- GEOGRAPHIC ANALYSIS BY LOCATION OF ENTITY Six months to Six months to Year to 30 June 30 June 31 December 2004 2003 2003 Turnover £m £m £m ------------------------------------------------------------------------------- Americas 80.2 78.0 157.3 Europe, Middle East and Africa 77.7 71.9 149.6 Asia 79.9 79.5 164.2 ------------------------------------------------------------------------------- 237.8 229.4 471.1 ------------------------------------------------------------------------------- Total operating profit ------------------------------------------------------------------------------- Americas 9.0 5.7 12.0 Europe, Middle East and Africa 5.5 6.1 11.0 Asia 25.6 25.9 53.2 ------------------------------------------------------------------------------- 40.1 37.7 76.2 Goodwill amortisation (0.7) (0.5) (1.0) Exceptional items - continuing - (1.1) (3.7) ------------------------------------------------------------------------------- 39.4 36.1 71.5 ------------------------------------------------------------------------------- Goodwill amortisation Americas 0.1 0.1 0.1 Europe, Middle East and Africa 0.5 0.3 0.8 Asia 0.1 0.1 0.1 ------------------------------------------------------------------------------- 0.7 0.5 1.0 ------------------------------------------------------------------------------- 3. TAXATION The tax charge on profits for the six months to 30 June 2004 of £9.9m (30 June 2003: £9.6m before exceptional items) is based on the estimated effective rate for the full year of 26.6% (30 June 2003: 29.5%, 31 December 2003: 27.8%). 4. DIVIDENDS The interim dividend of 3.4p per ordinary share (interim 2003: 2.9p) will be paid on 16 November 2004, to shareholders on the register at 5 November 2004. 5. EARNINGS PER ORDINARY SHARE Six months to Six months to Year to 30 June 30 June 31 December 2004 2003 2003 Based on the profit for the period: £m £m £m ------------------------------------------------------------------------------- Underlying profit before tax 37.9 33.0 68.2 Taxation on underlying profit (9.9) (9.6) (18.7) Minority interest in underlying profit (2.3) (1.9) (3.7) ------------------------------------------------------------------------------- Underlying earnings 25.7 21.5 45.8 Goodwill amortisation (0.7) (0.5) (1.0) Exceptional operating items - 0.1 (1.1) Exceptional non operating items - 4.6 4.5 Taxation on exceptional items - 0.4 (0.1) ------------------------------------------------------------------------------- Basic earnings 25.0 26.1 48.1 ------------------------------------------------------------------------------- Number of shares (millions): Basic weighted average number of shares 154.3 153.6 153.7 Potentially dilutive share options 0.7 0.8 0.7 ------------------------------------------------------------------------------- Diluted weighted average number of shares 155.0 154.4 154.4 ------------------------------------------------------------------------------- Basic underlying earnings per share 16.7p 14.0p 29.8p Options (0.1)p (0.1)p (0.1)p ------------------------------------------------------------------------------- Diluted underlying earnings per share 16.6p 13.9p 29.7p ------------------------------------------------------------------------------- Basic earnings per share 16.2p 17.0p 31.3p Options (0.1)p (0.1)p (0.2)p ------------------------------------------------------------------------------- Diluted earnings per share 16.1p 16.9p 31.1p ------------------------------------------------------------------------------- The weighted average number of shares used in the calculation of the diluted earnings per share for the six months to 30 June 2004, excludes 1,414,765 potential shares (31 December 2003: 1,220,962; 30 June 2003: 2,906,610) as these were not dilutive in accordance with FRS 14: Earnings per share. 6. PENSION SCHEMES There has been no significant change in the net liabilities of the Group's defined benefit pension schemes since 31 December 2003. As permitted by FRS 17, actuarial valuations of the assets and liabilities of the defined benefit pension schemes were not performed at 30 June 2004. 7. ACQUISITIONS In the period to 30 June 2004, the Group made acquisitions for total consideration of £23.0m, comprising the fair value of net assets of £6.3m and goodwill of £16.7m. Included within these figures is the acquisition of Entela Inc for consideration including fees, of £16.3m, comprising the fair value of net assets of £4.0m and goodwill of £12.3m. These figures are provisional, pending the final agreement of the fair value of assets acquired. The cash outflow in the period in connection with these acquisitions was £19.9m. 8. SHAREHOLDERS' FUNDS/(DEFICIT) Share Share premium Merger Other Profit and capital account reserve reserves loss account Total £m £m £m £m £m £m ---------------------------------------------------------------------------------------------------------------- At 1 January 2004 1.5 232.1 3.6 2.8 (283.0) (43.0) Restatement (note below)* - - - - (0.1) (0.1) ---------------------------------------------------------------------------------------------------------------- Restated at 1 January 2004 1.5 232.1 3.6 2.8 (283.1) (43.1) Retained profit for the period - - - - 19.8 19.8 Issue of shares - 2.1 - - - 2.1 Exchange adjustments - - - - 2.4 2.4 ---------------------------------------------------------------------------------------------------------------- At 30 June 2004 1.5 234.2 3.6 2.8 (260.9)** (18.8) ---------------------------------------------------------------------------------------------------------------- * In accordance with UITF 38, own shares of £0.1m held by the ESOT have been reclassified from investments. ** Including £235.2m (31 December 2003: £244.1m) for goodwill written off to reserves in relation to subsidiaries acquired prior to 1 January 1998. 9. OPERATING CASH FLOW Six months to Six months to Year to 30 June 30 June 31 December 2004 2003 2003 £m £m £m ----------------------------------------------------------------------------------------- Group operating profit after exceptional items 38.8 36.7 72.9 Depreciation charge 8.9 9.1 18.6 Goodwill amortisation 0.7 0.5 1.0 Loss on sale of fixed assets 0.1 - 0.5 (Increase)/decrease in stocks (0.2) 0.1 0.1 Increase in debtors (8.5) (6.8) (10.5) Increase/(decrease) in creditors 2.8 (6.8) (3.3) (Decrease)/increase in provisions (3.2) 0.4 0.7 ----------------------------------------------------------------------------------------- Total operating cash inflow 39.4 33.2 80.0 ----------------------------------------------------------------------------------------- 10. ANALYSIS OF NET DEBT At 1 January Non Exchange At 30 June 2004 Cash flow cash changes adjustments 2004 £m £m £m £m £m ----------------------------------------------------------------------------------------- Cash 81.5 (16.0) - (1.5) 64.0 Borrowings (213.7) 8.8 (0.4) 8.2 (197.1) ----------------------------------------------------------------------------------------- Total net debt (132.2) (7.2) (0.4) 6.7 (133.1) ----------------------------------------------------------------------------------------- 11. CONTINGENT LIABILITIES: CLAIMS AND LITIGATION There have been no material developments concerning claims and litigation, which in the opinion of the directors, would give rise to a material adverse effect on the financial position of the Group in the foreseeable future. 12. APPROVAL The interim financial statements were approved by the Board on 3 September 2004. This information is provided by RNS The company news service from the London Stock Exchange

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