Final Results
Sondex PLC
15 May 2007
Sondex plc
("Sondex" or the "Company")
Preliminary Results for the year ended 28 February 2007
Financial highlights
• Revenue up 33% to £68.5 million (2006 - £51.4 million)
• Adjusted* Operating profit up 49% to £18.6 million (2006 - £12.5 million)
• Reported Operating profit up 22% to £11.9 million (2006 - £9.7. million)
• Adjusted diluted** earnings per share up 45% to 18.4p (2006 - 12.7p)
• Basic diluted earnings per share 9.8p (2006 - 9.0p)
• Operating cash increased to £9.7 million inflow (2006 - £6.4 million)
• Full year recommended dividend up 31% to 2.76p (2006 - 2.1p)
Operational highlights
• Acquisition of the trade and assets of Bluestar Tools
• Acquisition of Ultima Labs Inc.
• Major development projects in field trials
• On-going investments in international locations
* Pre amortisation of acquired intangible assets and aborted acquisition costs
** Pre amortisation of acquired intangible assets and aborted acquisition costs,
with pro-forma tax charge.
Iain Paterson, Chairman of Sondex, commented:
" Sondex has made further excellent progress with strong results in both
divisions. The company's investment in R&D, global sales and marketing
initiatives as well as the recent acquisitions, AES, Bluestar and Ultima, have
all contributed to this performance.
The Company enters its new financial year with confidence. The markets in which
we operate continue to be buoyant and our order book stands at record levels.
Sondex has now completed five acquisitions in the last four years building a
solid foundation from which the Board is confident that further growth will be
delivered in the coming years."
15 May 2007
Enquiries:
Sondex Tel: 0125 286 2200
Martin Perry (Chief Executive)
Chris Wilks (Finance Director)
College Hill Tel: 020 7457 2020
Nick Elwes
Paddy Blewer
Chairman's statement
Your company has produced an impressive trading and financial performance for
the year to 28 February 2007 and has continued to develop its international
presence.
Revenues rose 33 per cent to £68.5 million from £51.4 million last year.
Operating profit, before exceptional costs and amortisation of acquired
intangible assets, increased by 49 per cent to £18.6 million from £12.5 million.
Fully diluted earnings per share, adjusted for amortisation of acquired
intangible assets, a pro-forma tax charge and exceptional costs were 18.4p, up
45 per cent on the previous year. Despite exceptional costs the net margin on
turnover improved to 24.9 per cent (24.3 per cent in 2006). After adding back
the exceptional costs the net margin becomes 27.1 per cent. Expenditure on R&
D increased by 38 per cent over the previous year to £6.5 million representing
some 9.5 per cent of revenues, demonstrating the Board's belief in the potential
for further growth from new product lines.
These results reflect the successful integration of previous acquisitions,
growth from both the Wireline and Drilling divisions and the addition of
Bluestar Tools and Ultima Labs Inc to the Group during 2006.
Strategic Progress
The Group has continued to implement its strategy of pursuing both organic
growth and selective earnings enhancing acquisitions. Organic growth was
boosted by the opening of an additional four international sales customer
support offices in the USA, Malaysia, China and Russia bringing the total to
fourteen.
The Board announced on 18 July 2006 the acquisition of the trade and assets of
Bluestar Tools, based in Calgary, Canada for a consideration of up to £11.1
million. Bluestar supplies a range of Measurement and Logging While Drilling
tools equipment which are complementary to the existing Drilling Division. On
29 September 2006 the Board announced the acquisition of Ultima Labs, Inc., a
private Houston based technology company with a range of IP and products related
to Logging While Drilling and Wireline applications for a consideration of up to
£4.9 million, including sales related earn-out.
In August 2006 a take-over bid was also launched for Innicor Subsurface
Technologies Inc, a Canadian company focused on completions technology. Due to
local market condition changes in Canada, an announcement was made by the Board
on 8 November 2006 stating that it no longer recommended the bid, and this
acquisition was not completed. An exceptional charge of £1.5 million has been
recorded in relation to the costs.
Board and Management
Peter Collins resigned from the Board and left the company on 23 May 2006.
Staff turnover has remained low, both in the established businesses and those
that have been more recently acquired. Employees have shown considerable
commitment and performance and this is directly reflected in the excellent
results.
On behalf of your Board I should like to thank all of our management and staff
for their outstanding effort and dedication during the past year.
Dividend
The Board is recommending a final dividend of 2.0p per share (1.4p in 2006),
giving a total for the year of 2.76p per share (2.1p in 2006). The increase of
31 per cent reflects both the underlying performance and the growth prospects of
the Group.
Outlook
The Group has entered the new financial year with continuing confidence.
As hydrocarbon demand continues to increase, yet fewer new reserves are
discovered, there is an on-going need for technologies to assist with efficient
extraction from mature oil and gas fields. Sondex has established a reputation
as a source of reliable and technically differentiated equipment which enables
local and major international service companies to take advantage of this need.
Your company's customer base continues to grow and the order book for existing
product lines remains strong. Additionally, as a result of our investment in
R&D and our acquisitions, we have a pipe-line of new products which are close to
commercialisation.
Against this background, the Board is confident that Sondex will again deliver
strong growth this year.
Iain Paterson
Chairman
Operating review
The results from the Group's ongoing strategy of investment in R&D and
complementary acquisitions together with increasing global presence has resulted
in a good all round performance.
Market Overview
Sondex addresses the Oilfield Services market by selling or renting to operators
of the equipment. The market for services provided by these customers using
equipment such as that supplied by or being developed by Sondex is now estimated
at $16 billion and is growing significantly. This target market is driven by
the need for technologies to extract the maximum hydrocarbons from identified
reserves and as 'peak oil production' is reached the need for efficient
extraction processes will continue in order to satisfy demand.
The annual spend on technology and equipment by the services sector is estimated
at 10 per cent of their revenues, or $1.6 billion. Sondex offers a partnership
for out-sourcing of both development and supply of equipment and can act as the
external engineering department for the smaller regional companies. Local
support, training and provision of spares and repairs is a crucial part of the
service Sondex supplies.
Operations
Sondex has undergone another year of broadening product lines by acquisition and
commercialisation of in-house developed products, and has further strengthened
regional presence through investment in sales, marketing and customer support.
The wireline product ranges, made up from the integration of the Sondex original
business, CSS (acquired in 2003) and AES (acquired in 2005) currently address
operations within producing oil or gas wells (Cased Hole operations). Sondex
has enhanced this range during the current year by the release of a new range of
sensors, MAPS(TM), which provides a significantly enhanced analysis of flow
regimes.
Sondex has additionally been investing in Formation Evaluation technology. This
includes a range of products which will help evaluate the rock formations and
reservoir characteristics themselves both through casing and in an open hole
environment. The target markets remain mature oil and gas fields, where
additional information can be retrieved from old wells and from new 'in-fill'
drilling.
The drilling product ranges, originally formed by the acquisition of Geolink in
2004 have been enhanced by in-house development and the addition of Bluestar
Tools and Ultima Labs Inc. during the period. A broader and more complete
product range can now be offered to the customer for the range of conditions
that may be encountered.
An internally developed product launched in this period was E-LinkTM; an
alternative method of transmitting data from the point of drilling to the
surface, which gives faster information and can operate in under-balanced
conditions used in lower pressure reservoirs and for coal bed methane drilling.
The acquired Bluestar products offer solutions for the shallower and vertical
drilling markets; the resistivity tool developed at Ultima Labs (and now being
integrated with the other product ranges) gives reservoir and formation
information during drilling operations.
A step-change drilling product developed primarily in-house is currently
undergoing field trials; a Rotary Steerable drilling tool which is targeting the
high volume in-fill production well drilling market with a design which is both
simple to operate and cost-effective to maintain.
Organisation
Sondex manages the development and production of equipment through the two
divisions and five product centres, in Hampshire, Aberdeen, Calgary, Houston and
Lafayette. Product managers have responsibility to the divisions for
integration and product strategy.
Manufacturing facilities have been extended in Calgary and Louisiana, with a
further lease in Aberdeen adjoining the existing Drilling headquarters due to
become productive during the current year. Supply chain management remains a
key focus with additional resources dedicated to this area.
The matrix management structure between product centres and regions has matured
during the year, enabling effective ownership of products and strategy as well
as cross-selling and shared resources in the regions.
Regional operations
In order to provide local partnership and support to customers and generate
incremental sales and rentals Sondex has continued to increase its local
representation through regional offices. During the past year Sondex has added
a new sales and customer support operation in Oklahoma City, Austin Texas,
Lafayette Louisiana and in Kuala Lumpur, Malaysia. Consolidation and expansion
has taken place in Beijing China, and an enlarged customer support location is
currently being established in Krasnodar Russia.
Sales
Group sales totalled £68.5 million in the year ended 28 February 2007. This was
a 33 per cent increase on the previous year (£51.4 million). Exports accounted
for approximately 90 per cent of the Group's revenues in 2007.
Wireline Division
Sales within the Wireline Division rose 20 per cent in the 2007 financial year.
Revenues totalled £42.2 million as against £35.3 million in 2006 with
consistent gross margins.
In the first full year of contribution to the Group's results AES products have
performed above expectations. AES products are now stocked and actively
marketed through the Middle Eastern operations where a number of sales have been
made, and conversely the Lafayette, Louisiana headquarters of AES has made some
significant sales of traditional Sondex Wireline equipment. A General Manager
of AES has been recruited and has been in situ since August 2006.
A development programme initiated during the previous period, to produce an
entirely new product line within the Wireline Division is progressing well. An
agreement has been made with a strategic partner in North America who has
committed to engineering sponsorship and early field support in order to
commercialise these products.
Drilling Division
Revenues from the Drilling Division in the 12 months ended 28 February 2007
totalled £26.2 million as against the £16.2 million in 2006, an increase of 62
per cent. Excluding the impact of the acquisitions during the year the increase
in the underlying business was 36 per cent.
Of particular note during the year has been the success of the Drilling business
in significantly increasing its presence internationally. The Drilling revenues
generated in the Canadian region have increased from £2.1 million to £6.4
million and in the Chinese region from less than £1 million to £4.5 million in
the year ended 28 February 2007.
Since the foundation of the Drilling Division a new technology has been
developed which enables efficient transmission of data from below ground to the
surface during drilling using Electro Magnetic methods. This is now
commercialised. This product has excellent potential in North America, and in
particular in regions producing coal bed methane.
The addition of Bluestar Tools and Ultima Labs Inc., has added a new generation
of product lines to the Drilling Division. The complementary products and
technologies will enable the Drilling Division to extend its market penetration
into the, typically, land-based vertical drilling markets as well to increase
formation evaluation capability.
Acquisition of Bluestar Tools
The Company announced on 18 July the acquisition of the trade and assets of
Bluestar Tools, based in Calgary, Canada. Bluestar is a fast growing supplier
of specialist technology and equipment used in drilling oil and gas wells which
is used to reduce drilling time and improve productivity. Bluestar supplies a
range of Measurement and Logging While Drilling tools which are complementary to
the existing Drilling Division and includes tools to assist, when desired, in
keeping wells vertical and straight during drilling.
Sondex has paid C$5.5 million (£2.7 million) for the trade and assets of the
business. A further C$7.4 million (£3.6 million) in shares and an additional
C$9.9 million (£4.8 million) are payable provided certain conditions are met.
The funding for this acquisition has been through an increased banking facility
of £6.7 million.
Whilst Bluestar is based in Canada a majority of its sales are made in the USA.
Bluestar's sales are expected to be increased globally with the help of the
Sondex international distribution network. This acquisition will allow Sondex to
combine Geolink and Bluestar's products providing an enhanced well orientation
solution enabling directional drilling contractors to offer a broader service.
Prior to the acquisition by Sondex, Bluestar was owner managed; the management
team has remained with the business and a programme of integration with Sondex
is well advanced and due for completion during the first quarter of the year
ending 29 February 2008.
Acquisition of Ultima Labs Inc.
On 29 September 2006 the Company announced that it had acquired Ultima Labs
Inc., a private Houston based technology development company with a range of IP
and products related to Logging While Drilling and Wireline applications for the
oilfield service industry, for a consideration of up to US$9.2 million (£4.9
million), including sales related earn-out.
The primary product that has been developed by Ultima and is in the process of
being commercialised is for Logging While Drilling involving multiple depth
resistivity measurements of the rock formations and their fluid content in order
to asses the potential for oil or gas production. This technology is a
complementary, next step, measurement for the existing Logging While Drilling
tools provided by the Sondex Drilling Division.
Ultima Labs has a Memorandum of Understanding to provide these products, with an
initial order to the value of $4.5 million, to a Chinese company that is also an
existing customer of Sondex.
The management team at Ultima, which has have extensive experience in technology
development for both wireline and drilling applications remained with the
business. The team participated in the integration of the technology into
existing product lines and will be involved in the development of future product
lines.
Research and Development
Investment in research and development activity during the financial year
totalled £6.5 million, representing 9.5 per cent of turnover (£4.7 million and
9.1 per cent respectively in 2006). Focused R&D continues to be regarded as a
principal engine for sustained organic growth and the Group remains committed to
investing about 10 per cent of its turnover on this important activity.
In the year ended 28 February 2007 about 21 per cent of R&D investment went
towards extending product lines to add functionality, incremental sales and
increased barriers to potential competitors; 24 per cent was spent on
maintaining and improving existing products; and the remaining 55 per cent went
towards the development of new product lines for step change growth.
About 50 per cent of revenue from 2007 on-going revenue is attributed to new
product releases within the last three years, and a cash payback within three
years is expected from investment in new projects.
At the end of the period the R&D activities across the Group employ 99 personnel
involved in sensor, software, electronic and mechanical design. They are based
in Hampshire, Aberdeen, Calgary and Houston.
Further product line enhancements and additional products have been released in
both the Wireline and Drilling Divisions. A production logging tool to assist
with three-phase flow analysis and an advanced Electro Magnetic telemetry system
for Measurement and Logging While Drilling are currently being commercialised.
Investment in step change product lines which will potentially open up new
markets in both wireline and drilling has progressed well. A select number of
strategic projects are undertaken with the backing of Oil company and service
company partners.
Summary
Sondex has again made solid progress in the year under review. The Group has
transformed into a fully functional multiple product line company with an
integrated customer interface. The results of investment in the Drilling
Division both before and after acquisitions have been clear to see with new
technologies being released and new markets addressed. A number of new product
lines are ready to commercialise. Sondex is increasingly recognised as the
supplier of superior wireline and drilling technology, enabling the service
customers to grow their own businesses in partnership with Sondex.
The Group's financial and management platforms are strong. The Board remains
confident in the strategy of pursuing growth through organic development, backed
by a strong R&D programme, and appropriate acquisitions. In summary, Sondex is
well placed to take advantage of opportunities and market conditions in the
future.
Martin Perry
Chief Executive
Financial review
The Group's operating profit was £11.9 million, representing an increase of 22
per cent on the £9.7 million generated in 2006. Adding back £1.5 million of
costs absorbed in relation to the aborted acquisition of Innicor Subsurface
Technologies Inc. and the amortisation of intangibles operating profit would
have been £18.6 million, representing an increased of 49 per cent on 2006.
Overview
The Group's turnover was £68.5 million in the year ended 28 February 2007, an
increase of 33 per cent on the previous year (£51.4 million). The Group's
operating profit before amortisation of intangible assets was £17.1 million in
2007 (£12.5 million in 2006) representing a net margin on turnover of 24.9 per
cent (24.3 per cent in 2006).
The Group's operating profit was £11.9 million (£9.7 million in 2006). This
operating profit was achieved in spite of a one off cost of £1.5 million in
relation to the aborted acquisition of Innicor.
If amortisation of intangibles and exceptional costs are added back operating
profit would have been £18.6 million, representing an increase of 49 per cent on
the £12.5 million generated in 2006. This represents a net margin of 27.1 per
cent compared with 24.3 per cent achieved in 2006.
Currency and interest rate risk
In common with previous years (and oil industry norms) the Group continues to
make a majority of its sales in US Dollars. In the year ended 28 February 2007
70 per cent of the Group's revenue was made in US Dollars (2006: 72 per cent).
The percentage of the Group's costs incurred in US Dollars has increased to 24
per cent from 17 per cent in 2006 following the acquisition of AES. In order to
provide a partial hedge against exchange rate movements, the Group's bank debt
is denominated in US Dollars. There remains an excess of US Dollar generation
greater than that required to fund the Group's US Dollar costs and service the
Group's bank debt and, wherever appropriate, it remains the Group's policy to
employ exchange rate instruments such as forward contracts and capped rate
contracts to provide some further protection to earnings. No such contracts
were held at the year end.
The US Dollar has weakened in the 12 months ended 28 February 2007 which has
resulted in a foreign exchange loss recognised in the income statement for the
year ended 28 February 2007 of £0.1 million.
The Group continues to partially hedge the interest rate risk with a mixture of
interest rate swaps providing a fixed Dollar base interest rate of 3.77 per cent
per annum and interest rate caps providing protection in the event that the base
interest rate increases beyond 3.77 per cent per annum. At the end of the
period 25 per cent of the bank borrowing was hedged against interest rate
increases using these instruments.
Taxation
The Group's tax rate for the year ended 28 February 2007 was 34 per cent (2006:
32 per cent). The effective tax rate is influenced by a number of factors,
including the blend of tax rates in the countries in which the Group operates,
the treatment of the high level of investment made in R&D and the application of
deferred taxation under IFRS.
The establishment of an increasing number of overseas subsidiaries exposes the
Group to local taxes at various rates, and the structure of the Group is kept
under review with the aim of achieving an overall balance in rates of taxation
applied.
Dividend
An interim dividend of 0.76p per share (2006: 0.7p) was paid on 15 December
2006. A final dividend of 2.0p per share (2006: 1.4p) payable on 29 June 2007
to shareholders on the register at 25 May 2007 is now recommended. This would
give a total of 2.76p per share for the year (2006: 2.1p per share), a 31 per
cent increase.
Cashflow
A key feature of the year was the cash inflow generated from operating
activities, which at £9.7 million represented a significant improvement from the
operating cash inflow of £6.4 million during the previous year. The Group was
able to absorb into this operating cash inflow a continued build in inventory
reflecting the continued strong demand for products, particularly in the
Wireline market.
During the year an incremental loan, in the sum of £11.5 million, was made
available, of which £6.7 million was drawn down to part-fund the acquisition of
the trade and certain assets of Bluestar.
The loan facility is secured by a fixed and floating charge over the assets of
the Group.
The loan is due for repayment in 36 months from 13 December 2006, subject to an
annual refreshment of the rolling 36 month term. Funds drawn down under the
facility are due for repayment at the earliest on 30 June 2008, subject to an
annual review.
Interest on the loan facility is charged quarterly, at rates between 1.45 per
cent and 1.7 per cent per annum above LIBOR.
At 28 February 2007, the Group had drawn down £5,693,000 against the facility of
£11 million, leaving £5,307,000 available at that date for the funding of future
operating activities. There are no restrictions on the use of these funds.
Debt management
The Group's gearing ratio decreased by 2 percentage points during the year from
47 per cent at 28 February 2006 to 45 per cent at 28 February 2007. Other
liquidity measures such as the quick ratio, interest cover and dividend cover
ratios remain comfortable.
Christopher Wilks
Finance Director
Consolidated income statement
for year ended 28 February 2007
2007 2006
Total Total
Note £000 £000
Revenue 1 68,483 51,449
Cost of sales (31,162) (22,341)
Gross profit 37,321 29,108
Other operating income 608 136
Research and development expense 2 (5,419) (4,249)
Sales, marketing and customer support expenses (6,645) (5,952)
Administration expenses excluding amortisation of acquired (7,290) (6,551)
intangible assets
Costs relating to the bid for Innicor Subsurface (1,500) -
Technologies Inc.
Operating profit before amortisation of acquired intangible 17,075 12,492
assets
Amortisation of acquired intangible assets (5,216) (2,803)
Operating profit 11,859 9,689
Financial income 828 450
Financial costs (4,149) (2,653)
Profit before taxation 8,538 7,486
Taxation 3 (2,865) (2,398)
Profit attributable to shareholders 5,673 5,088
Dividends paid 5 (1,230) (1,106)
Earnings per share on profit attributable to shareholders
- Basic 4 10.2p 9.3p
- Diluted 4 9.8p 9.0p
- Adjusted basic 4 19.2p 13.2p
- Adjusted diluted 4 18.4p 12.7p
Consolidated balance sheet
at 28 February 2007
2007 2006
Note £000 £000
Non-current assets
Goodwill 44,177 42,757
Other intangible assets 27,749 17,590
Property, plant and equipment 8,122 5,535
Financial assets - derivatives - 111
Investments 67 42
80,115 66,035
Current assets
Inventories 20,346 14,796
Trade and other receivables 25,358 24,759
Cash and cash equivalents 3,149 2,099
Financial assets - derivatives 85 -
48,938 41,654
Current liabilities
Financial liabilities - borrowings (5,693) (5,395)
Financial liabilities - derivatives (25) -
Trade and other payables (11,494) (9,798)
Provisions (2,841) -
Current tax (1,698) (3,599)
(21,751) (18,792)
Non-current liabilities
Provisions (4,307) -
Financial liabilities - borrowings (29,275) (25,142)
Financial liabilities - derivatives - (32)
Deferred tax liabilities (3,478) (3,801)
(37,060) (28,975)
Net assets 70,242 59,922
Shareholders' equity
Share capital 5,679 5,585
Share premium 42,692 42,565
Other reserves 10,598 5,739
Retained earnings 11,273 6,033
Total equity 70,242 59,922
Approved by the Board
Martin Perry
Chief Executive
14 May 2007
Consolidated statement of changes to equity
for year ended 28 February 2007
2007 2006
£000 £000
Total equity at start of period 59,922 53,214
Profit for the period attributable to shareholders 5,673 5,088
Items of income and expense recognised directly in equity:
Net foreign exchange differences (832) 90
Current taxation benefit on share options 431 -
Deferred tax on items not recognised in the income statement 366 218
(35) 308
Total income and expense for the year 5,638 5,396
Transactions with equity holders:
Dividends paid (1,230) (1,106)
Shares issued (net of expenses) 221 1,630
Shares to be issued (deferred consideration) 4,603 -
Share based payments 1,088 788
70,242 59,922
Consolidated cash flow statement
for year ended 28 February 2007
2007 2006
Note £000 £000
Cash flows from operating activities
Operating profit before amortisation of acquired 17,075 12,492
intangibles
Depreciation of property, plant and equipment 1,105 1,268
Amortisation of capitalised development expenditure 1,495 1,052
Amortisation of other intangible assets - 154
Charge for share based payment 1,088 788
(Increase) in trade and other receivables (1,785) (5,190)
(Increase) in inventories (6,420) (5,868)
Increase in trade and other payables 2,340 2,996
Cash generated from operations 14,898 7,692
Income tax (paid) (5,214) (1,258)
Net cash inflow/(outflow) from operating activities 9,684 6,434
Cash flows from investing activities
Interest received 828 339
Acquisition of trade and assets / subsidiaries (3,636) (6,094)
Capital expenditure (3,682) (2,301)
Development expenditure (2,617) (1,471)
Proceeds from the sale of property, plant and equipment 35 790
Net cash used in investing activities (9,072) (8,737)
Cash flows from financing activities
Loans received 6,745 5,729
Repayment of loans - (3,494)
Interest paid (3,337) (2,015)
Dividends paid (1,230) (1,106)
Net cash from financing activities 2,178 (886)
Net increase / (decrease) in cash and cash equivalents 2,790 (3,189)
Cash and cash equivalents at the beginning of the period (3,296) (1,410)
Cash acquired with acquisition of subsidiaries 71 116
Net effect of exchange rate changes (2,109) 1,187
Cash and cash equivalents at the end of the period (2,544) (3,296)
Notes to the Preliminary Announcement
For the year ended 28 February 2007
1 Primary reporting format - business segments
Wireline Division Drilling Division Eliminations Consolidated
2007 2006 2007 2006 2007 2006 2007 2006
£000 £000 £000 £000 £000 £000 £000 £000
Revenue
External sales 42,238 35,276 26,245 16,173 - - 68,483 51,449
Inter-segment sales - - - - - - - -
Segment revenue 42,238 35,276 26,245 16,173 - - 68,483 51,449
Result
Segment result before 12,657 10,928 8,315 4,323 - - 20,972 15,251
amortisation of
acquired intangible
assets
Amortisation of (497) (109) (4,719) (2,694) - - (5,216) (2,803)
acquired intangible
assets
Segment result 12,160 10,819 3,596 1,629 - - 15,756 12,448
Unallocated expenses (3,897) (2,759)
Operating profit 11,859 9,689
Financial income 828 450
Financial costs (4,149) (2,653)
Profit before taxation 8,538 7,486
Taxation (2,865) (2,398)
Profit attributable to 5,673 5,088
shareholders
Wireline Division Drilling Division Eliminations Consolidated
2007 2006 2007 2006 2007 2006 2007 2006
£000 £000 £000 £000 £000 £000 £000 £000
Assets and liabilities
Segment assets 80,183 68,399 48,870 39,290 - - 129,053 107,689
Unallocated assets - -
Total assets 80,183 68,399 48,870 39,290 - - 129,053 107,689
Segment liabilities (4,618) (6,879) (6,876 ) (2,919) - - (11,494) (9,798)
Unallocated (47,317) (37,969)
liabilities
Total liabilities (4,618) (6,879) (6,876) (2,919) - - (58,811) (47,767)
Other information
Capital expenditure - (1,749) (1,380) (1,400) (777) - - (3,149) (2,157)
PPE
Capital expenditure -
Intangibles
(533) (144) - - (533) (144)
Depreciation (812) (479) (209) (88) - - (1,021) (567)
Amortisation of (497) (109) (4,719) (2,694) - - (5,216) (2,803)
acquired intangible
assets
Movements in (84) (612) - (89) - - (84) (701)
impairment provisions
Secondary reporting format - geographic segments
Sales by destination
2007 2006
£000 £000
USA and South America 22,387 13,103
Canada 12,028 6,781
Europe and Africa 14,184 10,533
Middle East 4,059 7,334
China 7,812 3,718
Russia and former Soviet Union 4,962 4,840
Rest of the world 3,051 5,140
Total 68,483 51,449
Total assets by location
2007 2006
£000 £000
Europe 99,752 89,864
USA 13,861 6,864
Canada 8,363 6,914
Middle East 7,077 4,047
Total 129,053 107,689
Capital expenditure by location
2007 2006
£000 £000
Europe 1,854 2,004
USA 205 7
Canada 1,595 188
Middle East 28 102
Total 3,682 2,301
2 Research and development expense
The charge in respect of research and development expense is analysed below:
2007 2006
£000 £000
Expenditure in the period (6,541) (4,668)
Development costs capitalised 2,617 1,471
Amortisation of capitalised development costs (1,495) (1,052)
Total research and development expense (5,419) (4,249)
3 Taxation
Recognised in the income statement
2007 2006
£000 £000
Current tax expense
Current year - UK tax charge 1,574 2,337
Current year - Overseas tax charge 2,515 1,738
4,089 4,075
Adjustments in respect of prior years - UK 2 5
Adjustments in respect of prior years - Overseas (97) (207)
(95) (202)
Deferred tax (credit) expense
Origination and reversal of temporary differences (1,144) (1,534)
Adjustments in respect of prior year 15 59
(1,129) (1,475)
Total taxation expense recognised in the income statement 2,865 2,398
4 Earnings per share
2007 2006
Basic earnings per share
Basic undiluted (pence) 10.2 9.3
Basic diluted (pence) 9.8 9.0
£000 £000
Profit attributable to shareholders 5,673 5,088
Weighted average number of shares (thousands)
Undiluted 55,696 54,578
Dilutive share options 3,803 3,012
Market price adjustment to dilutive share options (1,338) (1,091)
Diluted 58,161 56,499
Adjusted earnings per share
Adjusted diluted (pence) 18.4 12.7
Adjusted basic (pence) 19.2 13.2
£000 £000
Adjusted earnings per share is presented on the following basis:
Profit attributable to shareholders (£000) 5,673 5,088
Add: amortisation of acquired intangible assets 5,216 2,803
Less: adjustment to taxation (1,261) (689)
Add: abort costs relating to bid for Innicor Subsurface Technologies Inc 1,500 -
Less: adjustment to taxation (450) -
Adjusted earnings 10,678 7,202
Diluted weighted average number of shares 58,161 56,499
The adjustment to taxation brings the charge to taxation to 30 per cent of
profit before amortisation and tax.
5 Dividends
Dividend Dividend
2007 per share 2006 per share
£000 pence £000 pence
Equity dividends on ordinary shares:
February 2005 final dividend - - 715 1.3
February 2006 interim dividend - - 391 0.7
February 2006 final dividend 798 1.4 - -
February 2007 interim dividend 432 0.8 - -
Total recognised 1,230 - 1,106 -
The directors are recommending a final dividend of 2.0p per share (total
£1,136,000) in respect of the year ended 28 February 2007. This dividend has not
been provided for in the balance sheet at 28 February 2007.
6 Basis of preparation
The financial information for the years ended 28 February 2007 and 28 February
2006 contained in this preliminary announcement was approved by the Board on 14
May 2007. This announcement does not constitute statutory accounts of the
Company within the meaning of section 240 of the Companies Act 1985.
Statutory accounts for the year ended 28 February 2006 have been delivered to
the Registrar of Companies. Statutory accounts for the year ended 28 February
2007 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting.
The auditors have reported on both these sets of accounts. Their reports were
not qualified and did not contain a statement under section 237 (2) or (3) of
the Companies Act 1985.
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