Final Results
Radstone Technology PLC
27 June 2006
FOR IMMEDIATE RELEASE 27 June 2006
Preliminary Results
"Record level of product introductions"
Radstone Technology, the world's leading independent supplier of
high-performance, embedded computer products for defence and aerospace
applications today announces preliminary results for the year ended 31 March
2006.
Key Points
• Order book ended the year up 9% at £94.1m (2005 : £86.5m)
• Turnover up 10% to £54.9m (2005: £49.9m).
• An exceptionally active period for product development with 21 new
product introductions. Spending on development in the year amounted to £7.7m
(2005: £6.1m) representing 13.9% (2005: 12.2%) of revenue.
• Final dividend of 3.15p per ordinary share increasing the total dividend
by 17% to 4.2p (2005: 3.6p).
• Adjusted Profit before tax of £5.6m (2005: £8.1m),
• Basic earnings per share were 10.91p (2005: 27.97p). Adjusted earnings
per share (see note 5) were 14.68p compared to 20.56p last year.
• Acquisition of the assets of Sonoran Microsystems Inc. through DaqScribe
Technology which further enhances the mechanical test and measurement
product portfolio.
Jeff Perrin, Chief Executive, commenting on the results said:
"This has been an exceptionally busy period for Radstone. We have ended the
financial year with a strong order book and have spent significant time and
resource on our product development.
Our efforts ensure we remain at the forefront of the military embedded computing
market and we are confident that this will continue to provide a solid base for
Radstone's future growth and strategic development."
For further information:
+-----------------------------------+-----------------------------------+
|Radstone Technology |01327-359444 |
|Jeff Perrin, Chief Executive |Web: www.radstone.co.uk |
|Kevin Boyd, Group Finance Director | |
+-----------------------------------+-----------------------------------+
| | |
+-----------------------------------+-----------------------------------+
|Buchanan Communications |020 7466 5000 |
+-----------------------------------+-----------------------------------+
|Tim Thompson or Nicola Cronk |Email : nicolac@buchanan.uk.com |
+-----------------------------------+-----------------------------------+
Chairman's Statement
for the year ended 31 March 2006
This has been a busy year for the Group with new orders received totalling
£62.1m, a 14% increase compared to last year and a closing order book for future
delivery of £94.1m, up 9% over last year. Revenue for the year increased by 10%
to £54.9m however adjusted profit before tax (see note 3) fell to £5.6m (2005:
£8.1m). The causes of the lower adjusted profit were in equal measures, the
decline in the US$ hedged exchange rate, a higher proportion of lower margin
product and increased development spend.
Basic earnings per share were 10.91p (2005: 27.97p). Adjusted earnings per share
(see note 5) were 14.68p compared to 20.56p last year.
Dividend
Your board is recommending a final dividend of 3.15p per ordinary share that
together with the interim dividend of 1.05p represents a 17% increase on last
year's total dividend. This will be paid on 27 September 2006 to shareholders on
the register on 8 September 2006.
New Product Development
This was an exceptionally strong year with 21 new products, including the first
from our new US Technology Centre. Together these will form the foundation of
our growth over the next few years, enhancing our ability to gain a steady
stream of new design-wins on future programmes. Spending on development reached
a record level of £7.7m, a 26% increase over last year, and represented 13.9%
(2005: 12.2%) of revenue.
Acquisition
During March 2006, we purchased, through DaqScribe Technology (our subsidiary
specialising in mechanical test and measurement), the assets of Sonoran
Microsystems Inc. for a consideration of $630k.
We remain committed to expanding the Group both organically and through
selective acquisitions that broaden our core competencies and extend our market
reach.
Board and Management
At this year's AGM I will retire from the board and the office of Chairman, a
position I have held for almost 14 years. Malcolm Baggott, who joined the
Company as a non-executive director in December 2005 will take over as Chairman
and I wish him every success in the role.
Sir Alan Thomas resigned as a non-executive director of the Company in January
2006 and we would like to thank him for his contribution.
As previously announced in May of this year, Kevin Boyd our Group Finance
Director will be leaving the Company in August 2006 to take up a role as Group
Finance Director of another listed company; we wish him well in his new position
and thank him for his contribution to the development of the Company. We are
currently in the process of recruiting his replacement.
Outlook
The record level of product introductions ensures that we will retain our
competitive advantage. This enables us to benefit from the strong prospects
within the worldwide military market, particularly in the USA where the recently
published Quadrennial Defense Review underlines the opportunities for growth in
our largest market.
We are confident that the military market will continue to provide a solid and
growing base for the strategic development of the Group.
Rhys Williams, Chairman
Operations Review
for the year ended 31 March 2006
Embedded Computing
2006 2005
£'000 £'000
Total revenue (all external) 46,032 41,822
Gross profit 23,090 23,676
Result before amortisation and 8,849 11,481
unallocated costs
As in previous years revenue was heavily weighted towards the second half of the
year, with 63% of deliveries made during quarters 3 and 4, compared with 70%
last year.
In our main US market, deliveries of £28.8m represented 63% of Embedded
Computing sales and 52% of Group revenue. Major US deliveries made during the
year were to General Dynamics on the M1A2 tank, Raytheon on the MK-48 and MK54
torpedo upgrade programmes and on the Advanced Targeting Forward-Looking
Infra-red pod for the F/A-18 Hornet fighter aircraft.
Gross profit at £23.1m was a similar level to last year, with margins decreasing
from 56.6% to 50.2%. This was mainly due to the decline in our US$ hedged
exchange rates and a greater proportion of sales of lower margin products.
The result before amortisation and unallocated costs decreased to 19.2% of sales
(2005: 27.5%) due to the gross margin reduction mentioned in the above paragraph
and the increased development expenditure which was 26% above last year.
In order to enhance DaqScribe, our Test & Measurement business, we acquired the
assets of Sonoran Microsystems Inc. based in Tucson, Arizona. Sonoran designs
advanced custom signal conditioning products for use in mechanical test and
measurement applications. This addition, following on from the acquisition of
Savvy Corp in the previous year, will further enhance DaqScribe's product
portfolio. This will enable DaqScribe to offer turnkey solutions for transient,
dynamic and static test applications. Within the next twelve months we will
integrate Sonoran with DaqScribe's existing facility in Centennial, Colorado.
In June 2005 we relocated our US headquarters from New Jersey to our technology
centre near Boston, Massachusetts. Since opening the centre in November 2004
three software products have been introduced which provide a software
environment designed to accelerate the development and deployment of complex
signal processing applications requiring multiprocessor systems.
Radstone has a strong record of developing leading edge products and our highly
focused product development programme differentiates us from the competition and
makes us the preferred supplier to leading military and aerospace companies. Our
investment in development in the year amounted to £7.7m (2005: £6.1m)
representing 16.6% (2005: 14.5%) of Embedded Computing sales. This year has been
an exceptionally productive period with 21 new product introductions; among
these was the CPX24 rugged gigabit ethernet switch designed to exploit the
growing use of this technology as the networking infrastructure in military
systems. Also introduced was the ICS-8145, a rugged data acquisition board for
sonar applications. We also launched a Pentium M-based graphics processor,
designed for the most demanding simulation, embedded training and war-gaming
applications, transferring this capability from training rooms into an
operational system.
A product of our development programme from the previous year, the GS16 Ethernet
Switch, was selected by Boeing to take part in a F-15E1 test mission to
demonstrate the capabilities of DARPA's Tactical Targeting Network Technology
Program. The mission was successfully completed in September 2005. DARPA is the
Defense Advanced Research Projects Agency, a US government body which manages
and directs selected basic and applied research and development projects for the
Department of Defense. It pursues research and technology where risk and payoff
are both very high and where success may provide dramatic advances for
traditional military roles and missions.
Electronic Manufacturing Services (EMS)
2006 2005
£'000 £'000
Total revenue 9,589 8,800
Sales to Embedded Computing (695) (735)
External revenue 8,894 8,065
Gross profit 2,272 1,873
Result before amortisation and unallocated costs 2,106 1,644
An excellent year for our EMS business. The result before amortisation and
unallocated costs represented a margin of 22.0%, compared to 18.7% last year.
Approximately 80% of the external revenue in the year was for commercial
customers involved in areas such as test & measurement, industrial control,
electronic displays and electronics for motor sports.
With an order book of £4.4m for short term delivery, the first half of 2007 will
be an extremely active period for the EMS business, but as one or two specific
contracts are due for completion by August the second half is likely to be
somewhat quieter.
Group Orders
New orders booked totalled £62.1m, compared with £54.4m in 2005, producing a
book to bill ratio of 1.13 for the Group.
Orders received from the USA were £38.5m (2005: £30.2m) including two major
multi-year production contracts. The first of these, for $12.5m, was received
from Raytheon in September 2005 for the Advanced Targeting Forward Looking
Infra-red pod programme for the F/A-18 Hornet fighter aircraft; this is in
addition to over $10m received on this contract in earlier years. During the
second half of the year an order was received from Harris for $13m on the
upgrade to the Universal Fire Control System programme for the High Mobility
Artillery Rocket System.
UK orders for the Group totalled £13.8m (2005: £18.3m) including a £2.5m order
for Octec to supply the ballistics predictor and auto tracker for a small
calibre gun system to be fitted to the Royal Navy Type 23 Frigates. Order intake
for the UK includes £9.0m for the EMS business, which is all UK based. This
compares to £8.4m last year.
Orders from mainland Europe of £6.5m (2005: £4.6m) and the Far East of £2.1m
(2005: £0.8m) increased for the second consecutive year. With a number of
identified opportunities and increased investment in these territories, further
progress is expected in 2007.
Orders from rest of the world were £1.2m, (2005: £0.7m) the majority originating
from Israel.
We begin the financial year 2007 in a strong position, with the Group order book
at £94.1m, an increase of 9% from the same period last year. From this order
book, £32.4m is deliverable by 31 March 2007 compared to £28.0m last year.
Jeff Perrin, Chief Executive
Financial Review
for the year ended 31 March 2006
Overview
Total Group sales increased by 10.1% to £54.9m with the percentage growth being
identical in both divisions. Underlying growth in Embedded Computing was 9.0%
after adjusting for the effect of the US dollar and the acquisitions and
disposals made in the prior year.
Reported gross margins in Embedded Computing fell to 50.2% from 56.6%. Stripping
out the effects of currency hedging, margins in constant dollars dropped 3.2
percentage points, a reflection of the change in the mix of products shipped
during the year.
The EMS business improved on last year's impressive result, lifting gross
margins from 21.3% to 23.7% as they continue to benefit from operational
efficiencies and successfully targeting high added value contracts. In this year
in particular we saw an increased proportion of "free issue" business which
results in a better percentage gross margin.
Expenditure on operating expenses (Distribution costs, Development costs and
Administrative expenses) increased by £2.6m, the majority of the increase being
in Development costs (£1.9m). Under the new IFRS accounting standards, the
"Amortisation of intangible assets arising from acquisitions" is included under
Development costs. Under UK GAAP this was reported as "Goodwill amortisation".
Excluding the movement in amortisation, the increase in Development costs was
£1.6m. The majority of this was due to the establishment of our US software
centre, increased investment in our test and measurement subsidiary and
additional costs due to the full year of ownership of Octec.
Under IFRS, interest charges are reported under the headings "Investment
revenue" and "Finance costs". Net borrowing costs were lower by £0.1m at £0.9m.
Finance costs also include the IAS 19 charge which represents a notional finance
charge for the deficit on the Group's pension schemes.
The tax charge of £0.7m is 18% of the pre-tax profit compared to 20% in 2005.
This improved percentage reflects the disproportionate effect of R&D tax credits
on the lower profit for the year.
Basic earnings per share of 10.91p were 17.06p below last year due to a
combination of reduced profits, exceptional profits in the prior year and the
movements in the fair values of financial instruments.
The adjusted earnings per share (see calculation in note 5) at 14.68p fell
proportionally less than adjusted profit due to the favourable tax charge
discussed above.
Cash flow
Net cash flow from operating activities was £1.6m, a drop of £3.6m over the
prior year, while EBITDA (see note 6) fell £2.4m to £9.1m reflecting the fall in
adjusted profit.
The difference between EBITDA and net cash flow from operating activities is
primarily due to a £5.3m increase in working capital, additional payments to the
defined benefit pension scheme and a reduction in tax paid. Inventories
increased broadly in line with revenues and include components for a major
European programme which have been purchased in advance to secure preferential
pricing. Receivables increased by £6.6m due to high fourth quarter sales.
After taking into account capital expenditure, the acquisition of Sonoran,
dividends, the purchase of own shares for employee incentive schemes and
interest received, net debt increased from £16.6m to £18.2m.
Information Technology
In July 2001 we successfully introduced SAP, an enterprise resource planning
system, across the Radstone Group. We are now in the process of implementing
this within the companies acquired since then. Octec Ltd successfully
implemented SAP in December 2005 and ICS Ltd is planning to complete their
implementation by September 2006.
Pensions
The Group has two defined benefit pension schemes which were closed to new
entrants in March 1997. During the year liabilities as measured under IAS 19
grew by £4.0m while the assets also grew by £4.0m leaving the deficit before tax
virtually unchanged at £9.5m. Plans are in place to eliminate this deficit over
the next ten years.
In June 2006 we started a process of consultation with the members of the above
schemes with the intention of ceasing future service accrual after 31 March 2007
and introducing a defined contribution element.
Dividends
Dividends paid and proposed for the year increased by 17% from 3.6p to 4.2p per
share.
Investment
With the completion of the Towcester facility in the prior year, capital
expenditure returned to 2004 levels at £1.6m.
In March we announced the acquisition of the trade and assets of Sonoran
Microsystems Inc. of Tucson, Arizona by our Test & Measurement subsidiary,
DaqScribe Inc. for a consideration of $630k
Liquidity
Net debt of £18.2 m equates to gearing of 40.6% compared to 39.3% at the end of
the prior year. Interest cover, based on adjusted operating profit was 7.4 times
(2005: 9.2). Dividend cover (paid and proposed) based on adjusted earnings was
3.5 times (2005: 5.6).
The Group seeks to reduce financial risk and to ensure sufficient liquidity is
available to meet foreseeable needs. Our policy is to maintain a balance between
continuity of funding and flexibility through the cost-effective use of
borrowings with a range of maturities.
Performance
Adjusted earnings per share, (see calculation in note 5), fell to 14.68p (2005:
20.56p). In constant dollar terms adjusted earnings per share would have been
17.6p.
Treasury
With a substantial percentage of revenue in United States dollars, hedging
foreign exchange fluctuations against this currency is recognised by the
directors as a key responsibility. While this exposure is naturally hedged by
purchases of components in US dollars and the local costs of our US operations,
there still remains a net exposure to be hedged. In the year, the net exposure
was approximately $40m.
Translation exposure arising on the consolidation of the Group's US and Canadian
assets is hedged by use of US and Canadian dollar loans in the UK parent
company. The net effects of these are taken directly to reserves, ensuring that
only trading transaction gains and losses on foreign exchange are represented in
the income statement.
The interest rate exposure on the US dollar, Canadian dollar and sterling loans
are managed by a number of interest rate swaps.
International Financial Reporting Standards
This is the first year that the Group has reported its results under
International Financial Reporting Standards (IFRS). The main variations from UK
GAAP are:
Goodwill is no longer amortised. For acquisitions after 1 April 2004, it is
necessary to identify separately from goodwill, values for acquired intangible
assets that previously under UK GAAP would have been included in goodwill. These
intangible items are then amortised to the income statement over their estimated
useful lives and reported on the line "Amortisation of intangibles arising from
acquisitions". In Radstone's case this applies to the acquisitions of Octec
Limited and Sonoran Inc, where the only separable intangible item recognised was
technology.
Due to its exposure to the US dollar the Group uses foreign currency derivatives
to hedge future cash flows. The Group has decided that the additional costs of
meeting the extensive documentation requirements of IAS 39 to apply hedge
accounting are not merited. Accordingly we cannot use hedge accounting for our
foreign currency derivatives; and gains and losses on marking to market such
derivatives at the balance sheet date have to be reflected in the income
statement and are disclosed on the line "Loss on fair value movement on
financial instruments" within Finance costs. It should be emphasised that this
notional reported "loss" will never be realised; it is simply a timing effect.
The real worth of the hedging is to fix the value in local currency of foreign
currency sales receipts in the future, thus reducing the uncertainty that would
otherwise exist as to their realisable value. Under the transitional
arrangements for the implementation of IFRS this item was not reported in the
prior year.
Pension deficits are now included in the consolidated Balance Sheet whereas
formerly they were disclosed as a note.
Dividends are now recorded as a liability when approved and not when proposed as
was previously the case.
Kevin Boyd, Group Finance Director
Consolidated Income Statement
for the year ended 31 March 2006
Notes 2006 2005
£'000 £'000
Continuing operations
Revenue 54,926 49,887
Cost of sales (29,564) (24,338)
Gross profit 25,362 25,549
Distribution costs (6,745) (6,346)
Development costs
- Product development (7,662) (6,078)
- Amortisation of intangibles
arising from acquisitions (1,050) (757)
(8,712) (6,835)
Administrative expenses (3,991) (3,652)
Other operating income - 2,912
Operating profit* 5,914 11,628
Investment revenue 138 160
Finance costs
- Borrowing costs (1,079) (1,195)
- Loss on fair value movement
on financial instruments (565) -
- Retirement benefit scheme
finance charges (424) (301)
(2,068) (1,496)
Profit before tax** 3,984 10,292
Tax (699) (2,045)
Profit for the year from
continuing operations
attributable to equity
holders of the parent 3,285 8,247
Ordinary dividends 4 1,137 954
Earnings per share (pence)
from continuing operations
Basic 5 10.91p 27.97p
Diluted 5 10.89p 27.81p
Adjusted 5 14.68p 20.56p
* Adjusted operating profit 3 6,964 9,473
** Adjusted profit before tax 3 5,599 8,137
Balance Sheet
at 31 March 2006
2006 2005
£'000 £'000
Non-current assets
Goodwill 24,741 24,733
Intangible assets arising from acquisitions 6,233 6,917
Other intangible assets 22 46
Property, plant and equipment 16,315 16,761
Deferred tax assets 2,844 2,869
50,155 51,326
Current assets
Inventories 12,284 11,219
Trade and other receivables 24,228 17,872
Derivative financial instruments 214 -
Cash and cash equivalents 2,188 4,304
38,914 33,395
Total assets 89,069 84,721
Current liabilities
Trade and other payables 10,470 8,562
Tax liabilities 1,103 1,161
Obligations under finance leases 192 259
Derivative financial instruments 547 -
Bank overdrafts and loans 4,812 3,500
17,124 13,482
Non-current liabilities
Bank loans 15,189 16,693
Retirement benefit obligations 9,479 9,564
Deferred tax liabilities 2,179 2,433
Obligations under finance leases 219 406
27,066 29,096
Total liabilities 44,190 42,578
Net assets 44,879 42,143
Equity
Share capital 3,792 3,787
Share premium account 25,152 25,059
Own shares (753) (431)
Other reserve 1,388 1,388
Hedging and translation reserves 673 139
Retained earnings 14,627 12,201
Total equity 44,879 42,143
Cash Flow Statement
for the year ended 31 March 2006
Notes 2006 2005
£'000 £'000
Net cash from operating activities 6 1,601 5,234
Investing activities
Interest received 138 159
Proceeds on disposal of SensorCom
Inc. - 832
Proceeds on disposal of property,
plant and equipment 1 3,908
Net cash disposed of with sale of - (251)
SensorCom Inc.
Purchases of property, plant and
equipment (1,566) (4,701)
Purchase of other intangible
assets - (5)
Purchases of trade and assets (381) (92)
Deferred consideration on
acquisition of ICS Limited - (3,254)
Increase in cost of investment in
ICS Limited - (28)
Net cash acquired with Octec
Limited - 1,979
Acquisition of Octec Limited - (12,501)
Net cash used in investing
activities (1,808) (13,954)
Financing activities
Dividends paid (1,137) (954)
Issue of share capital 87 6,170
Purchase of own shares under
Employee Incentive Schemes (409) (152)
Repayments of borrowings (877) (2,493)
Repayments of obligations under
finance leases (259) (289)
New bank loans raised 1,358 1,118
Net cash (used in)/from financing
activities (1,237) 3,400
Net decrease in cash and bank
overdrafts (1,444) (5,320)
Cash and bank overdrafts at start
of year 3,766 9,150
Effect of foreign exchange rate
changes (134) (64)
Cash and bank overdrafts at end of
year 7 2,188 3,766
Consolidated Statement of Recognised
Income and Expense
for the year ended 31 March 2006
2006 2005
£'000 £'000
Adoption of IAS 32/39:
Fair value of financial instruments at 1 April
2005 957 -
Exchange differences on translation of foreign
operations 464 505
Actuarial losses on defined benefit pension
schemes (197) (2,391)
Tax on items taken directly to equity (78) 717
Net income/(expense) recognised directly in equity 1,146 (1,169)
Transferred to profit or loss on cash flow hedges (726) -
Tax on items transferred from equity 218 -
Profit for the period 3,285 8,247
Total recognised income and expense for the period
attributable to equity holders of the parent 3,923 7,078
Notes:
1. Basis of accounting
The Group's principal accounting policies, as set out in its interim statement
of 23 November 2005, which is available on the Company's website
www.radstone.co.uk, have been applied consistently.
This announcement was approved by the Board of Directors on 26 June 2006.
2. Segmental information
Business segments
For management purposes, the Group is organised into two divisions, Embedded
Computing and Electronics Manufacturing Services. These divisions are the basis
on which the Group reports its primary segment information.
Segmental information about these businesses is presented below.
Electronic
Embedded Manufacturing
Computing Services Total
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
Total revenue 46,032 41,822 9,589 8,800 55,621 50,622
Inter-segment
sales - - (695) (735) (695) (735)
External revenue 46,032 41,822 8,894 8,065 54,926 49,887
Cost of Sales (22,942) (18,146) (6,622) (6,192) (29,564) (24,338)
Gross profit 23,090 23,676 2,272 1,873 25,362 25,549
Inter-segment sales are charged at prevailing market prices.
Result
Result before
amortisation and
unallocated costs 8,849 11,481 2,106 1,644 10,955 13,125
Amortisation of
intellectual
property arising
through
acquisition (1,050) (757) - - (1,050) (757)
Gain on disposal
of SensorCom Inc. - 641 - - - 641
Segment result 7,799 11,365 2,106 1,644 9,905 13,009
Unallocated
corporate expenses (3,991) (3,652)
Profit on disposal
of freehold land and
buildings - 2,271
Profit from
operations 5,914 11,628
Investment revenue 138 160
Finance costs (2,068) (1,496)
Profit before tax 3,984 10,292
Tax (699) (2,045)
Profit after tax 3,285 8,247
2. Segmental information (continued)
Capital expenditure, additions to intangibles, depreciation and amortisation
Electronic
Embedded Manufacturing
Computing Services Total
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Capital
expenditure and
additions to
intangibles
(excluding
goodwill) 1,272 4,515 294 191 1,566 4,706
Depreciation and
amortisation 2,871 2,430 345 339 3,216 2,769
Total assets by segment
Electronic
Embedded Manufacturing
Computing Services Total
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Segment assets 78,765 73,904 4,208 3,644 82,973 77,548
Unallocated 6,096 7,173
Total assets 89,069 84,721
Unallocated assets represent tax recoverable, deferred tax assets, derivatives
at fair value and cash and cash equivalents.
Total liabilities by segment
Electronic
Embedded Manufacturing
Computing Services Total
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Segment 8,477 6,776 2,402 2,451 10,879 9,227
liabilities
Unallocated 33,311 33,351
Total liabilities 44,190 42,578
Unallocated liabilities represent derivatives at fair value, tax payable,
deferred tax liabilities, retirement benefit obligations and bank loans and
overdrafts.
Geographical segments
2006 2005
£'000 £'000
External Revenue
United Kingdom 13,358 10,931
Rest of Europe 6,265 6,399
North America 28,795 28,960
Rest of World 6,508 3,597
54,926 49,887
Revenues are based on the location of the customer.
2. Segmental information (continued)
Other Information Total Assets Additions to property,
plant and equipment and
intangible assets
2006 2005 2006 2005
£'000 £'000 £'000 £'000
United Kingdom 47,226 45,538 1,337 4,530
North America 35,745 32,006 229 176
Rest of Europe 2 4 - -
82,973 77,548 1,566 4,706
Unallocated 6,096 7,173 - -
89,069 84,721 1,566 4,706
Total assets are based on the location of the assets. Unallocated assets
represent taxation, derivatives at fair value and cash and cash equivalents.
Additions to property, plant and equipment and intangible assets are based on
the location of the assets.
3. Reconciliations between profit and adjusted profit
Additional performance indicators have been used based upon adjustments to
operating profit to exclude exceptional non-trading income and amortisation of
intangible assets. These are calculated as follows:
Notes 2006 2005
£'000 £'000
Operating profit 5,914 11,628
Amortisation of intangibles arising
from acquisitions (a) 1,050 757
Profit on disposal of freehold land
and buildings - (2,271)
Gain on disposal of SensorCom Inc. - (641)
Adjustments to operating profit 1,050 (2,155)
Adjusted operating profit 6,964 9,473
Profit before tax 3,984 10,292
Financial instruments (b) 565 -
Adjustments to operating profit
(above) 1,050 (2,155)
Adjustments to profit before tax 1,615 (2,155)
Adjusted profit before tax 5,599 8,137
Profit for the year 3,285 8,247
Adjustments to profit before tax
(above) 1,615 (2,155)
Tax effect of adjustments to profit (479) (30)
Adjusted profit for the year (c) 4,421 6,062
(a) Amortisation of intangibles arising on acquisitions relates to acquired
intellectual property. Under UK GAAP this charge would have formed part of the
amortisation of goodwill, which was also excluded from the adjusted operating
profit.
(b) IAS 39 ("Financial Instruments: Recognition and Measurement") was adopted
with effect from 1 April 2005. IAS 39 requires the Group to fair value the
financial instruments used to manage Radstone's foreign exchange exposures. This
creates volatility on profit over the full term of the outstanding instruments
as exchange rates move over time. This will have minimal impact on profit over
the full term of the instruments, but can cause significant volatility on
particular balance sheet dates. Radstone is therefore stating profit before tax
and profit for the year before changes in the valuation of these instruments so
that the underlying performance of the Group can more clearly be seen.
3. Reconciliations between profit and adjusted profit (continued)
2006 2005
£'000 £'000
Movement in fair value of financial instruments:
Fair value at 31 March 2006 (334) -
less: initial fair value recognised on 1 April
2005 (957) -
(1,291) -
Recycled gains to income statement from initial
fair value 726 -
Financial instruments (565) -
(c) The adjusted profit for the year forms the basis of the earnings used in the
calculation of adjusted earnings per share, as set out in note 5.
4. Dividends
Amounts recognised as distributions to equity holders in the year:
2006 2005
£'000 £'000
Final dividend for the year ended 31 March 2005 of
2.7p (31 March 2004: 2.25p) per ordinary share 819 681
Interim dividend for the year ended 31 March 2006
of 1.05p (31 March 2005: 0.90p) per ordinary share 318 273
1,137 954
Proposed final dividend for the year ended 31
March 2006 of 3.15p (31 March 2005: 2.7p) per
share 956 819
The proposed final dividend is subject to approval by shareholders at the Annual
General Meeting and has not been included as a liability in these financial
statements.
5. Earnings per share
2006 2005
Pence Pence
per per
share share
Earnings per share from continuing operations
Basic 10.91 27.97
Diluted 10.89 27.81
Adjusted 14.68 20.56
5. Earnings per share (continued)
The calculation of the basic, diluted and adjusted earnings per share is based
on the following data:
2006 2005
£'000 £'000
Earnings
Earnings for the purposes of basic earnings per
share being profit for the period from continuing
operations 3,285 8,247
Profit for the period from continuing operations 3,285 8,247
Adjustment to exclude amortisation of intangibles
arising from acquisitions (net of tax) 741 525
Adjustment to include financial instruments (net
of tax) 395 -
Adjustment to exclude profit on disposal of
freehold land and buildings (net of tax) - (2,334)
Adjustment to exclude gain on disposal of
SensorCom Inc. (net of tax) - (376)
Earnings for the purposes of adjusted earnings per
share 4,421 6,062
2006 2005
'000 '000
Number of shares
Weighted average number of ordinary shares for the
purposes of basic and adjusted earnings per share 30,109 29,488
Effect of dilutive potential ordinary shares:
Share options 61 170
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 30,170 29,658
6. Notes to the cash flow statement
2006 2005
£'000 £'000
Profit from operations 5,914 11,628
Adjustments for:
Profit on disposal of freehold land and buildings - (2,271)
Gain on disposal of SensorCom Inc. - (641)
Depreciation of property, plant and equipment 2,142 1,972
Amortisation of intangible assets 1,074 797
EBITDA 9,130 11,485
Loss on disposal of property, plant and equipment 3 4
Cost of equity settled employee share schemes 175 187
Decrease in post employment benefit obligation (25) (46)
Cash payments to the pension scheme in excess of
the charge to the income statement (710) -
Decrease in provisions - (216)
Operating cash flows before movements in working
capital 8,573 11,414
Increase in inventories (1,054) (1,576)
Increase in receivables (6,631) (3,131)
Increase in payables 2,386 1,707
Cash generated by operations 3,274 8,414
Income taxes paid (524) (2,136)
Interest paid (1,149) (1,044)
Net cash from operating activities 1,601 5,234
2006 2005
£'000 £'000
Reconciliation of cash and bank overdrafts to net
debt
Decrease in cash and bank overdrafts (1,444) (5,320)
Effect of foreign exchange rate changes on cash
and bank overdrafts (134) (64)
(1,578) (5,384)
Cash outflow from decrease in debt and lease
financing 1,136 2,782
Cash inflow from increase in debt and lease
financing (1,358) (1,118)
Change in net debt arising from cash flows (1,800) (3,720)
Effect of foreign exchange rate changes on
borrowings 130 (117)
Movement in net debt in the period (1,670) (3,837)
Net debt at start of the year (16,554) (12,717)
Net debt at end of the year (18,224) (16,554)
7. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less. The carrying amount
of these assets approximates their fair value.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit ratings assigned by international credit-rating agencies.
2006 2005
£'000 £'000
Cash at bank and in hand 2,188 4,304
Cash and cash equivalents 2,188 4,304
Cash and bank overdrafts as shown in the
consolidated cash flow statement comprise:
Cash and cash equivalents 2,188 4,304
Bank overdrafts (included within current
liabilities) - (538)
Cash and bank overdrafts 2,188 3,766
8. The financial information above does not constitute the Company's statutory
accounts. The auditors have still to report on the statutory accounts for the
year ended 31 March 2006. Statutory accounts for the year ended 31 March 2005
have been reported on without qualification by the Company's auditors and
without reference to S237 (2) or (3) of the Companies Act 1985. Statutory
accounts for the year ended 31 March 2005 have been prepared under UK GAAP and
have been delivered to the Registrar of Companies. Whilst the financial
information included in this preliminary announcement has been computed in
accordance with IFRS this announcement does not itself contain sufficient
information to comply with IFRS. The statutory accounts for the year ended 31
March 2006, prepared under IFRS, will be delivered to the Registrar in due
course.
9. Copies of the 2006 Report and Accounts will be sent to shareholders in due
course. Further copies will be available from the registered office of Radstone
Technology PLC, Tove Valley Business Park, Towcester, Northants NN12 6PF.
This information is provided by RNS
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