Interim Results
Radstone Technology PLC
10 November 2003
For Immediate Release 10 November 2003
Interim Results
Radstone Technology, the world's leading independent supplier of
high-performance, embedded computer products for defence and aerospace
application today announces Interim results for the six months ended 30
September 2003.
Key Points
• Normalised Earnings per share up 65% to 3.88p (2002 : 2.35p)
• Profit before tax (including contribution from our ICS acquisition)
increased 74% to £1.18m (2002: £675,000) on turnover of £18.5 million
• Gross Profit margin increased strongly to 41.6% (2002 : 35.6%) -
effects of sales of higher margin rugged products into major programmes.
• Strong initial contribution from Interactive Circuits and Systems
(ICS) acquired at the beginning of September.
• Embedded Computing - seven new products to the market, including those
to target the growing COTS avionics market.
• Interim dividend of 0.75p per share (2002 : nil)
Jeff Perrin, Group Managing Director commenting on the results said:
"The Embedded Computing business, the major part of the Group, has been
strengthened further by the acquisition of ICS and a positive start has been
made in the process of integration. As in previous years, trading in this part
of the business is expected to be heavily weighted towards the second half and
we are confident of a resulting strong performance in this period."
For further information:
Radstone Technology 01327-359444
Jeff Perrin, Group Managing Director Web: http://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 six months ended 30 September 2003
Results
I am pleased to announce that the first half year earnings compared favourably
with the same period last year, with a strong initial contribution from
Interactive Circuits and Systems Ltd ("ICS"), our recent acquisition completed
at the beginning of September.
Sales, including one month's contribution from ICS, increased marginally to
£18,489,000, although like for like sales decreased by 6% to £17,225,000. A
substantial margin improvement in the existing business, resulted in profit
before tax (excluding ICS) of £696,000 compared to £675,000 last year.
Including ICS, profit before tax was £1,175,000. ICS has a September year-end,
which reflects the seasonal weighting of its sales cycle resulting in a high
level of orders being shipped. This should not be seen as indicative of future
monthly performances.
Gross profit margins in the period increased strongly from last year's 35.6% to
41.6%, reflecting the effects of sales of higher margin rugged products into
major programmes and the one month contribution of high margin ICS products.
With overheads increasing by 12%, which included a 19% increase in product
development, a higher goodwill charge due to the acquisition, lower interest
costs due to the strong cash generation and a tax charge of 35%, basic earnings
per share were 3.15p (2002: 1.96p). Normalised earnings per share (see note1)
were 3.88p (2002: 2.35p) an increase of 65%.
During the first half of the year the Group received a 17% increase in new
orders to £30,078,000, (2002: £25,665,000). ICS contributed £2,158,000 to this
total.
With a strong book to bill ratio of 1.63, the order book for future delivery
ended the period at £74,326,000, 19% above the level at the start of this year,
despite continuing weakness of the US Dollar reducing the order book in sterling
by £2,384,000.
The amount of the order book scheduled for delivery in the second half of this
year is £18,541,000, compared to an equivalent figure of £19,548,000 twelve
months ago.
Last year the total of orders that were both booked and shipped within the
second half of the year was £10,544,000.
Business Development
Embedded Computing
2003 2002
£'000 £'000
Third party sales 13,299 12,786
Gross profit 7,336 5,794
Contribution 2,954 1,776
Excluding the strong deliveries by ICS, sales on a like for like basis decreased
by 6%. More than two-thirds of this decline was due to the weaker US dollar.
Sales of higher margin rugged products and the addition of high value added ICS
products produced an increase in gross profit from 45.3% to 55.2%.
Development expenditure at £2,196,000 represented a 19% increase from last year
and 16.5% of sales. In the first six months of the year we introduced no fewer
than seven new products to the market.
These included the RT4PowerPact CompactPCI computer system, the IMPCC1 3U
CompactPCI carrier card for PMC modules and the PMCGA3 high performance graphics
board. These products enable Radstone to target the growing COTS avionics
market where space is at a premium. During September, our ICS subsidiary
introduced the ICS-572 14-bit software radio product, combining both receive and
transmit functions in one PMC module.
Investing in the development of future products is a key component of our
competitive strategy and we expect the second half of the year to be as
productive as the first in terms of new product introductions.
Order intake at £25,604,000 was 52% above last year. During the period, one US
and one UK major multi-year production contracts were received with a combined
value of over £17m.
Electronic Manufacturing Services
2003 2002
£'000 £'000
Total sales 5,565 6,029
Sales to Embedded Computing (375) (413)
External sales 5,190 5,616
Gross profit 361 750
Contribution 219 588
Third party sales were almost 8% below last year, continuing to reflect the
difficult UK trading environment in which Foundation Technology operates.
In early July, the Towcester operation of the EMS business completed its move in
to new premises in Milton Keynes. The move was completed within four days,
ensuring a minimum amount of disruption to production.
Order intake was at a reduced level of £5,558,000 for the half year. This was
37% below the equivalent prior year figure, which included a major order for
assembly of vehicle diagnostic equipment at a level £2,100,000 above this year.
A complete review of our EMS business is currently being undertaken, with the
objective of improving its efficiency and contribution to the Group.
Financial
Operating cash inflow for the half-year continues to be very strong at
£5,480,000 (2002: £4,871,000), reflecting continued strong management of working
capital.
Payments for servicing finance and taxation were respectively £46,000 and
£904,000 (2002: £172,000 and £725,000). Expenditure on fixed and intangible
assets net of disposals, including those that are leased, was £3,500,000 (2002:
£688,000). This included £2,818,000 for the freehold site and the first stage
payment on construction of the new building. £207,000 (2002: £90,000) was
expended on the purchase of the Company's own shares for the employee Share
Incentive Plan and as part of the directors' and senior managers' bonus plan for
the year 2003.
From the resultant free cash flow of £823,000 (2002: £3,196,000) a dividend
payment of £479,000 (2002:£238,000) was made to shareholders on 29 September
2003.
Payment for the acquisition of ICS, including costs, of £18,552,000, was
financed by £10,700,000 from the proceeds of a placing and open offer and the
balance by a new medium term loan.
Net debt at 30 September 2003 was £6,625,000. This included £245,000 of net
cash in ICS on acquisition, a £40,000 exchange rate loss on net foreign cash
balances in the Group and additional funds of £115,000 received from the
exercise of share options. Gearing was 20% at 30 September 2003 compared to 26%
at 30 September 2002 and net cash of £563,000 at the end of last year.
Investment in product development represented 11.9% of Group sales (2002: 10.0%
of Group sales).
As a result of our expectations for ICS we have recognised the deferred
consideration of £4,464,000 within goodwill and other creditors due after more
than one year.
New Facility
As previously announced, the Radstone Group's headquarters and the Embedded
Computing business will move to a new purpose built 75,000 sq. ft. facility
within Towcester. The land was purchased and construction commenced in August
2003, progress is currently on schedule for a completion date in May 2004.
A new loan facility has been arranged for £10,500,000, for the purpose of
financing the purchase of the freehold land and building construction which, at
30 September 2003 remained undrawn.
Dividend
An interim dividend of 0.75 pence per share (2002: nil) will be paid on 19
January 2004 to shareholders on the register on 19 December 2003.
The Board
Considering the development and size of the Radstone Group, the directors
believe it is appropriate to increase the number of non-executive directors to
three. We are currently at the beginning of this recruitment process and have
commissioned a third party consultant to assist the board in this task.
As previously announced, Dr Charles Paterson retired as Group Managing Director
on 10 September 2003 and was replaced by Jeff Perrin, who had been the Group's
Finance Director since 1989. In March of this year we appointed Kevin Boyd as
Finance Director-Designate; on 10 September he was appointed Group Finance
Director.
Outlook
Market conditions remain difficult for the EMS business. Your management remain
committed to improving results from this business, while maintaining our
leadership position in its market niche.
The Embedded Computing business, which is the major part of the Group and
already a strong player in its market, has had its position strengthened further
by the acquisition of ICS. We have made a positive start to the process of
integration. As in previous years, trading in this part of the business is
expected to be heavily weighted towards the second half and your board is
confident of a resulting strong performance in this period.
Rhys Williams
Chairman
Consolidated Profit & Loss Account
for the six months ended 30 September 2003
6 months 6 months 12 months
to 30/9/03 to 30/9/02 to 31/3/03
(neither (neither (audited)
audited audited nor
nor reviewed) reviewed)
£'000 £'000 £'000 £'000
Turnover
Continuing 17,225 18,402 48,494
Acquisition 1,264 - -
18,489 18,402 48,494
Cost of sales (10,792) (11,858) (29,674)
Gross profit 7,697 6,544 18,820
Administration costs
Administration (1,741) (1,397) (3,083)
Development (2,196) (1,846) (3,942)
Goodwill (178) (93) (186)
Total administration costs (4,115) (3,336) (7,211)
Distribution costs - sales and marketing (2,328) (2,334) (5,152)
Operating profit
Continuing 774 874 6,457
Acquisition 480 - -
1,254 874 6,457
Net interest payable (79) (199) (332)
Profit on ordinary activities before
taxation 1,175 675 6,125
Taxation (409) (211) (1,866)
Profit for the period 766 464 4,259
Dividend (211) - (477)
Retained profit for the period 555 464 3,782
Basic earnings per share 3.15p 1.96p 17.98p
Normalised earnings per share 3.88p 2.35p 18.77p
Diluted earnings per share 3.13p 1.95p 17.86p
Statement of total recognised gains and losses
£'000 £'000 £'000
Profit for the period 766 464 4,259
Exchange rate adjustment 61 (231) (217)
Total gains recognised relating to the period 827 233 4,042
There is no material difference to the profit reported above and that calculated
on the historical cost basis.
Turnover and operating profit all relate to continuing operations.
Consolidated Balance Sheet
at 30 September 2003
at 30/9/03 at 30/9/02 at 31/3/03
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Fixed assets
Goodwill 23,889 3,194 3,100
Intangible assets 64 85 57
Total intangible assets 23,953 3,279 3,157
Tangible assets 9,546 5,743 5,997
Own shares 551 325 344
34,050 9,347 9,498
Current assets
Stocks 10,270 11,279 9,450
Debtors 10,528 10,225 13,248
Cash at bank and in hand 8,706 162 4,406
29,504 21,666 27,104
Creditors: amounts falling due
within one year
Bank and other borrowings 2,832 1,735 939
Other creditors 9,713 7,242 10,420
12,545 8,977 11,359
Net current assets 16,959 12,689 15,745
Total assets less current liabilities 51,009 22,036 25,243
Creditors: amounts falling due after
more than one year
Bank and other borrowings 12,499 3,267 2,904
Other creditors 4,791 - -
Provisions for liabilities and charges 183 - 234
17,473 3,267 3,138
Net assets 33,536 18,769 22,105
Capital and reserves
Called up share capital 3,488 2,980 2,982
Share premium account 19,828 9,517 9,519
Revaluation reserve 218 218 218
Profit and loss account 10,002 6,054 9,386
Equity shareholders' funds 33,536 18,769 22,105
Consolidated Cash Flow Statement
for the six months ended 30 September 2003
6 months 6 months 12 months
to 30/9/03 to 30/9/02 to 31/3/03
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Operating activities
Net cash inflow from operating activities 5,480 4,871 12,676
Servicing of finance
Interest received 81 7 18
Interest paid (82) (116) (219)
Interest paid on finance leases (45) (63) (116)
(46) (172) (317)
Taxation
UK Corporation tax paid (904) (725) (1,703)
Overseas tax paid - - -
(904) (725) (1,703)
Capital expenditure
Purchase of tangible fixed assets (3,506) (628) (1,810)
Disposal of tangible fixed assets 6 3 4
Purchase of own shares (207) (90) (109)
Purchase of intangible fixed assets - (63) (63)
(3,707) (778) (1,978)
Equity dividends paid (479) (238) (238)
Acquisitions
Purchase of subsidiary undertaking (18,552) - -
Net cash acquired with subsidiary 1,706 - -
(16,846) - -
Net cash (outflow)/inflow before (16,502) 2,958 8,440
financing
Financing
Issue of ordinary share capital 10,815 11 15
New loans 10,013 - -
Repayment of loans (298) (250) (500)
Repayment of principal under finance (207) (247) (496)
leases
20,323 (486) (981)
Increase in cash 3,821 2,472 7,459
Consolidated Cash Flow Statement Note
for the six months ended 30 September 2003
6 months 6 months 12 months
to 30/9/03 to 30/9/02 to 31/3/03
(neither (neither (audited)
audited nor audited nor
reviewed) reviewed)
£'000 £'000 £'000
Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit 1,254 874 6,457
Amortisation of goodwill 178 93 186
Operating profit before goodwill 1,432 967 6,643
Amortisation of intangible fixed assets 22 28 56
Depreciation of tangible fixed assets 894 832 1,687
Ebitda 2,348 1,827 8,386
(Profit)/loss on disposal of tangible fixed (1) 8 80
assets
Decrease in stocks 493 494 2,323
Decrease in debtors 4,850 5,340 1,881
(Decrease)/increase in creditors (2,210) (2,798) 6
Net cash inflow from operating activities 5,480 4,871 12,676
Other Notes to the Interim Statement
1 Earnings per share
6 months 6 months 12 months
to 30/9/03 to 30/9/02 to 31/3/03
Basic earnings per share 3.15p 1.96p 17.98p
Normalised earnings per share 3.88p 2.35p 18.77p
Diluted earnings per share 3.13p 1.95p 17.86p
The calculation of basic and diluted earnings per share is based on the
following profit for the period after tax:
6 months 6 months 12 months
to 30/9/03 to 30/9/02 to 31/3/03
£'000 £'000 £'000
Profit after tax 766 464 4,259
Other Notes to the Interim Statement
for the six months ended 30 September 2003
Normalised earnings per share is calculated after adjusting the profit after tax
for the effect of goodwill amortisation and is more indicative of underlying
performance. The reconciliation of basic to normalised earnings per share is as
follows:
6 months 6 months 12 months
to 30/9/03 to 30/9/02 to 31/3/03
Basic earnings per share 3.15p 1.96p 17.98p
Goodwill written off 0.73p 0.39p 0.79p
Normalised earnings per share 3.88p 2.35p 18.77p
The weighted average number of shares in issue during the period used in the
calculation of earnings per share is as per the following table:
6 months 6 months 12 months
to 30/9/03 to 30/9/02 to 31/3/03
'000 '000 '000
Weighted average shares for basic and
normalised earnings per share 24,324 23,686 23,683
Calculation of shares under option per 164 146 160
FRS14
Weighted average shares for
diluted earnings per share 24,488 23,832 23,843
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 2003 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 2003.
4 Copies of the 2003 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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