Interim Results
Radstone Technology PLC
06 November 2002
Interim Results for the six months ended 30 September 2002
STRONG GROWTH CONTINUES AT RADSTONE
Radstone Technology PLC ("Radstone", LSE:RST), the leading supplier of
high-performance, rugged computer products to the defence and aerospace
industries, today announces its Interim Results for the six months ended 30
September 2002.
Highlights
• PBT increases by £1.73m to £675,000 (30 September 2001: loss of £1.05m)
• EPS increases by 4.97p to 2.35p (2001: loss per share 2.62p)
• Turnover increased by 18% to £18.4m (30 September 2001: £15.5m)
• Order book for H2 delivery ahead 16% to £19.5m (September 2001: £16.8m)
• £2,958k of free cash flow generated
• Significant contract wins during the period:
• £2.67m Aselsan Pedestal Mounted Stinger System
• Lockheed Martin LAMPS project extended for further 5 years
Rhys Williams, Chairman, commented:
" This has been an excellent period for Radstone Technology. We are benefiting
from strong growth in both sales and margins.
" The Company's profile in the rugged computer market is growing, with an
increasing number of system integrators choosing Radstone products. Our spending
on R&D is strengthening further our market position. We have added eight new
product lines in this period alone.
" Defence spending, and particularly high-technology smart weaponry spending is
a growing part of national budgets world-wide. The surge in orders following the
US defence review continues. Our ruggedised computer systems are being adopted
extensively by US defence contractors.
" Additionally, we are now seeing enquiries from defence contractors in
important emerging territories such as India, China and Turkey. Coupled with the
continuing strong demand from our core UK and US markets, we believe the future
for Radstone is promising.
- ends -
Date: 6 November 2002
For further information please contact:
Radstone Technology PLC City Profile Group
Charles Paterson, Group Managing Director Ed Senior
Jeff Perrin, Finance Director Simon Courtenay
01327-359444 020-7448-3244
Web: www.radstone.com E-mail: edward.senior@city-profile.com
Chairman's Statement
for the six months ended 30 September 2002
Results
I am pleased to announce that the first half of the year has been very positive
for the Company. A sales increase of 19%, coupled with a significant margin
improvement, resulted in profit before tax of £675,000 compared to a loss of
£1,045,000 last year.
Sales for the six months ended 30 September 2002 were £18,402,000, compared to
£15,523,000 last year.
Gross profit margins in the period increased strongly from last year's 28.5% to
35.6%, reflecting the effects of lower component prices and higher sales on a
relatively fixed cost of production. With overheads increasing by 8% driven by
an 11% increase in R&D, lower interest costs due to the strong cash generation
and a tax charge of 31%, basic earnings per share were 1.96p (2001: loss per
share 3.02p). Normalised earnings per share were 2.35p (2001: loss per share
2.62p)
During the first half of the year we received new orders of £25,665,000, a 65%
increase over the £15,589,000 achieved in the corresponding period last year.
Despite a book to bill ratio of 1.39, the order book for future delivery ended
the period at £75,122,000, only 2% above the level at the beginning of the year.
As I set out in my AGM statement, the total was adversely affected by the
weakness of the US dollar. The effect in sterling of dollar devaluation at the
half year was equivalent to an order book reduction of £5.5 million. Our
existing foreign exchange instruments ensure that our expectations for the
periods to 31 March 2004 are not affected.
The amount of the order book scheduled for delivery in the second half of this
year is £19,548,000, compared to an equivalent figure of £16,800,000 twelve
months ago.
Last year the total orders that were both booked and shipped within the second
half of the year was £8,900,000.
Business Development
Embedded Computing
2002 2001
£'000 £'000
Third party sales 12,786 9,471
Gross profit 5,794 3,837
Contribution 1,776 218
Sales increased by 35%, reflecting more normal trading conditions than those
prevailing during the equivalent period last year. The higher sales level,
together with lower component prices and relatively stable production costs,
resulted in an improvement in gross profit margin from 40.5% to 45.3%.
The development of new and improved products continues to represent our
principal barrier against growing international competition and I am pleased to
report that the period saw no fewer than eight major new hardware introductions.
These included PMC-StarLite, Radstone's first StarFabric inter-board
interconnect module and IMP1A, a high performance 3U CompactPCI processor
targeted at the military avionics market place. A further five new product
introductions are planned in the second half of the financial year.
The Company's profile within the industry has grown substantially during the
year, driven partly by the quality of recent product innovations and partly as a
consequence of corporate activity within the market sector, which positions
Radstone clearly as the largest and most capable independent supplier. This has
translated to a high level of enquiry activity, not only in the traditional UK
and US markets but also in important emerging territories such as India, China
and Turkey, where the capability of our product range is now fully appreciated.
Order intake at £16,847,000 was 38% above last year. During the period, an
agreement was completed with Lockheed Martin, extending the present LAMPS
production arrangements for a further 5 years and introducing the Company's
products to other programmes.
Electronic Manufacturing Services
2002 2001
£'000 £'000
Total sales 6,029 6,463
Sales to Embedded Computing (413) (411)
External sales 5,616 6,052
Gross profit 750 582
Contribution 588 370
Sales were 7% below last year, reflecting the difficult UK trading environment
in which Foundation Technology currently operates, although as a result of the
restructuring actions taken in the early months of the period, the business
returned a significantly improved contribution compared to last year.
With the traditional customers continuing to scale back their requirements, a
key management aim has been to develop customers in new market areas, exploiting
the strengths of the business in terms of process capability, quality and
responsiveness.
The success of these efforts is evident in the strong order intake of £8,818,000
for the half year, 115% above the equivalent prior year figure. Over £3million
of these orders are for delivery in the next financial year.
Financial
Operating cash inflow for the period was £4,871,000 (2001: outflow £1,218,000),
representing the effect of cash generated from the high level of deliveries in
the fourth quarter last year.
Additional funds of £11,000 were received from the exercise of share options.
Payments for servicing finance and taxation were respectively £172,000 and
£725,000 (2001: £227,000 and £448,000). Expenditure on fixed assets net of
disposals, including those that are leased was £625,000 (2001: £969,000), with
an additional £63,000 paid for software licences (2001: £Nil). £90,000 was
expended on the purchase of the Company's own shares for the employee Share
Incentive Plan which commenced in April 2001 and as part of the directors' and
senior managers' bonus plan for the year 2002. Following our return to the
dividend list, a payment of £238,000 was made to shareholders on 30 September
2002.
The resultant cash inflow, increased by a £220,000 exchange rate movement on net
foreign borrowings, produced a £3,189,000 decrease in net debt from 31 March
2002 to £4,840,000. Gearing was 26% at 30 September 2002 compared to 55% at 30
September 2001 and 43% at the end of last year.
Investment in product development increased by 11% to £1,846,000, representing
10.0% of Group sales and 14.4% of Embedded Computing sales (2001: £1,667,000,
representing 10.7% of Group sales and 17.6% of Embedded Computing sales).
On 5 November 2002 we announced that the Company had exchanged contracts on the
sale of its freehold property at Water Lane, Towcester for a cash consideration
of £4,100,000, which will be paid on completion. The consideration compares with
a net book valuation of £1,348,000 at 31 March 2002. An alternative location has
been identified and relocation of the businesses at the Water Lane site into
local purpose-built facilities is expected to take place within the next two
years.
As mentioned in my statement in the Annual Report, the Board does not consider
it appropriate to pay an interim dividend due to the weighting of earnings
between the two halves of the year. Provided that we continue to make good
progress in the remainder of the year, we expect to be able to recommend an
increased final dividend.
Outlook
For the EMS business, the third quarter will be a particularly busy period,
although at this stage fourth quarter deliveries seem likely to fall back to the
levels experienced in the first half. As I indicated last year, sales growth is
unlikely in this part of our business until an industrial recovery is
experienced in the UK.
In contrast, the Embedded Computing business is likely to see a strong second
half with sales volumes at levels similar to last year.
The Company is well placed for the future. We enjoy an excellent reputation in
the marketplace and, as I indicated in the Annual Report, Radstone is now the
partner of choice for an increasing number of system integrators. The scale,
duration and strategic significance of these developments continues to give your
Board confidence for the future and we look forward to reporting further
progress at the time of our Preliminary Announcement.
Rhys Williams
Chairman
Consolidated Profit & Loss Account
for the six months ended 30 September 2002
6 months 6 months 12 months
to 30/9/02 to 30/9/01 to 31/3/02
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Turnover 18,402 15,523 41,204
Cost of sales (11,858) (11,104) (25,501)
__________ __________ __________
Gross profit 6,544 4,419 15,703
Administration costs
Administration (1,397) (1,315) (2,528)
Development (1,846) (1,667) (3,474)
Goodwill (93) (93) (186)
__________ __________ __________
Total administration costs (3,336) (3,075) (6,188)
Distribution costs - sales and marketing (2,334) (2,164) (4,443)
__________ __________ __________
Operating profit/(loss) 874 (820) 5,072
Net interest payable (199) (225) (497)
__________ __________ __________
Profit/(loss) on ordinary activities before taxation 675 (1,045) 4,575
Taxation (211) 330 (1,451)
__________ __________ __________
Profit/(loss) for the financial year 464 (715) 3,124
Dividend - - (238)
__________ __________ __________
Retained profit/(loss) for the period 464 (715) 2,886
__________ __________ __________
Basic earnings/(loss) per share 1.96p (3.02)p 13.19p
__________ __________ __________
Normalised earnings/(loss) per share 2.35p (2.62)p 13.97p
__________ __________ __________
Diluted earnings/(loss) per share 1.95p (3.02)p 13.12p
__________ __________ __________
Turnover and operating profit/(loss) all relate to continuing operations._
Consolidated Balance Sheet
at 30 September 2002
at 30/9/02 at 30/9/01 at 31/3/02
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Fixed assets
Goodwill 3,194 3,379 3,286
Intangible assets 85 68 50
__________ __________ __________
Total intangible assets 3,279 3,447 3,336
__________ __________ __________
Tangible assets 5,743 6,039 5,967
Own shares 325 217 235
__________ __________ __________
9,347 9,703 9,538
__________ __________ __________
Current assets
Stocks 11,279 12,784 11,773
Debtors 10,225 9,388 15,273
Cash at bank and in hand 162 716 672
__________ __________ __________
21,666 22,888 27,718
__________ __________ __________
Creditors: amounts falling due
within one year
Bank and other borrowings 1,735 6,042 4,828
Other creditors 7,242 8,979 10,030
__________ __________ __________
8,977 15,021 14,858
__________ __________ __________
Net current assets 12,689 7,867 12,860
__________ __________ __________
Total assets less current liabilities 22,036 17,570 22,398
Creditors: amounts falling due after
more than one year
Bank and other borrowings 3,267 2,829 3,873
__________ __________ __________
Net assets 18,769 14,741 18,525
__________ __________ __________
Capital and reserves
Called up share capital 2,980 2,977 2,977
Share premium account 9,517 9,509 9,509
Revaluation reserve 218 218 218
Profit and loss account 6,054 2,037 5,821
__________ __________ __________
Equity shareholders' funds 18,769 14,741 18,525
__________ __________ __________
Consolidated Cash Flow Statement
for the six months ended 30 September 2002
6 months 6 months 12 months
to 30/9/02 to 30/9/01 to 31/3/02
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Operating activities
Net cash inflow/(outflow) from operating activities 4,871 (1,218) 788
__________ __________ __________
Servicing of finance
Interest received 7 13 17
Interest paid (116) (174) (420)
Interest paid on finance leases (63) (66) (137)
__________ __________ __________
(172) (227) (540)
__________ __________ __________
Taxation
UK Corporation tax paid (725) (193) (957)
Overseas tax paid - (255) (295)
__________ __________ __________
(725) (448) (1,252)
__________ __________ __________
Capital expenditure
Purchase of tangible fixed assets (628) (543) (1,265)
Disposal of tangible fixed assets 3 - -
Purchase of own shares (90) (70) (88)
Purchase of intangible fixed assets (63) - -
__________ __________ __________
(778) (613) (1,353)
__________ __________ __________
Equity dividends paid (238) - -
__________ __________ __________
Net cash inflow/(outflow) before financing 2,958 (2,506) (2,357)
__________ __________ __________
Financing
Issue of ordinary share capital 11 9 9
Repayment of loans (250) (250) (500)
Repayment of principal under finance leases (247) (269) (503)
__________ __________ __________
(486) (510) (994)
__________ __________ __________
Increase/(decrease) in cash 2,472 (3,016) (3,351)
__________ __________ __________
Consolidated Cash Flow Statement Note
for the six months ended 30 September 2002
6 months 6 months 12 months
to 30/9/02 to 30/9/01 to 31/3/02
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Reconciliation of operating profit/(loss) to net cash
inflow/(outflow) from operating activities
Operating profit/(loss) 874 (820) 5,072
Amortisation of goodwill 93 93 186
Amortisation of intangible fixed assets 28 18 36
Depreciation of tangible fixed assets 832 720 1,516
Loss on disposal of tangible fixed assets 8 1 5
Decrease/(increase) in stocks 494 (2,774) (1,763)
Decrease/(increase) in debtors 5,340 2,734 (3,755)
Decrease in creditors (2,798) (1,190) (509)
__________ __________ __________
Net cash inflow/(outflow) from operating activities 4,871 (1,218) 788
__________ __________ __________
Other Notes to the Interim Statement
1 Earnings/(loss) per share
6 months 6 months 12 months
to 30/9/02 to 30/9/01 to 31/3/02
Basic earnings/(loss) per share 1.96p (3.02)p 13.19p
__________ __________ __________
Normalised earnings/(loss) per share 2.35p (2.62)p 13.97p
__________ __________ __________
Diluted earnings/(loss) per share 1.95p (3.02)p 13.12p
__________ __________ __________
The calculation of basic and diluted earnings/(loss) per share is based on the
following profit/(loss) for the period after tax:
6 months 6 months 12 months
to 30/9/02 to 30/9/01 to 31/3/02
£'000 £'000 £'000
Profit/(loss) after tax 464 (715) 3,124
__________ __________ __________
Other Notes to the Interim Statement
for the six months ended 30 September 2002
Normalised earnings/(loss) per share is calculated after adjusting the profit/
(loss) after tax for the effect of goodwill amortisation and is more indicative
of underlying performance. The reconciliation of basic to normalised earnings/
(loss) per share is as follows:
6 months 6 months 12 months
to 30/9/02 to 30/9/01 to 31/3/02
Basic earnings/(loss) per share 1.96p (3.02)p 13.19p
Goodwill written off 0.39p 0.40p 0.78p
__________ __________ __________
Normalised earnings/(loss) per share 2.35p (2.62)p 13.97p
__________ __________ __________
The weighted average number of shares in issue during the period used in the
calculation of earnings/(loss) per share is as per the following table:
to 30/9/02 to 30/9/01 to 31/3/02
'000 '000 '000
Weighted average shares for basic and
normalised earnings/(loss) per share 23,686 23,699 23,696
Calculation of shares under option per FRS14 146 - 123
__________ __________ __________
Weighted average shares for
diluted earnings/(loss) per share 23,832 23,699 23,819
__________ __________ __________
FRS14 requires presentation of diluted earnings per share when a company could
be called upon to issue shares that would decrease net profit or increase net
loss per share. For a loss making company with outstanding options, net loss per
share would only be increased by the exercise of out-of-the-money options.
The diluted earnings per share of (3.03)p disclosed in the Company's Interim
Report for the six months ended 30 September 2001 was calculated in accordance
with the requirements of FRS14.
As it seems inappropriate to assume that option holders would act irrationally
and exercise out-of-the-money options, consensus opinion is that in the absence
of any other diluting future share issues, diluted earnings per share is equal
to basic earnings per share in loss making periods. The comparative disclosure
for diluted earnings per share for the six months ended 30 September 2001 has
therefore been amended to (3.02)p.
2 The above accounts do not constitute full accounts within the meaning of S.240
of the Companies Act 1985. All figures for the year to 31 March 2002 are
abridged. Full accounts, on which the report of the auditors was unqualified and
did not contain a statement under S.237 (2) or S.237 (3) of the Companies Act
1985, have been delivered to the Registrar of Companies. The results for the six
months to 30 September are neither audited nor reviewed.
3 The interim financial information has been prepared on the basis of accounting
policies consistent with those applied in the financial statements for the year
to 31 March 2002.
4 Copies of the 2002 Interim Report and Accounts will be sent to shareholders in
due course. Further copies will be available from the registered office of
Radstone Technology PLC, Water Lane, Towcester, Northants NN12 6JN.
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