Final Results

Fairey Group PLC 12 March 2001 Date: Embargoed until 7.00am, Monday, 12th March, 2001 Contact: John Poulter, Chief Executive Fairey Group Tel 0207 831 3113 (am) Richard Mountain Financial Dynamics Tel 0207 831 3113 2000 PRELIMINARY RESULTS STATEMENT Fairey Group plc, the international instrumentation and controls group, announces preliminary results for the year ended 31 December 2000. 2000 1999 Increase Sales £464.0m £275.3m 69% Operating profit (*) £ 58.6m £ 35.3m 66% Adjusted profit before tax (*) £ 51.0m £ 30.1m 69% Earnings per share (normalised) 34.6p 22.4p 54% Dividends for the year 11.7p 11.0p 6% (*) before exceptional items and goodwill amortisation Commenting on the results, John Poulter, Chief Executive, said: '2000 was an outstanding year in which strong markets and our initiatives produced substantial growth, augmented by the successful acquisition of Spectris.' Highlights include: * Organic sales growth of 24% * Product gross margins maintained despite Euro and Yen weakness * Continuing strong cash generation * Spectris acquisition provides an immediate earnings enhancing contribution * Adoption of new Spectris name and identity reflecting a repositioned international instrumentation group with good geographical balance Results As indicated at the interim stage, the fundamental strengths of our business and the recent substantial investments in technology and marketing were rewarded by a strong increase in trading performance in 2000. Impressive organic sales growth of 24%, combined with the impact of the mid-year acquisition of Spectris AG, delivered a substantial 66% uplift in operating profits before exceptional items and goodwill amortisation. Normalised earnings per share increased by 54% to 34.6p (22.4p). It is proposed to pay a final dividend of 8.15p, making a total of 11.7p, an increase of 6%. The dividend is three times covered. The final dividend will be paid on 15 June 2001 to shareholders on the register on 18 May 2001. Cash generation, measured by the proportion of operating profit converted into operating cash after accounting for net capital expenditure, was 103% in the Fairey companies, but lower in Spectris where improvement can be expected in the future. Year end net debt was £153.5m and interest was covered 7.7 times. In aggregate, gross margins were maintained despite the price and margin disadvantages flowing from the currency effects of our US and UK-based businesses exporting into the Euro zone. This performance underlines the strength of the group's market positions. The group benefited in sterling terms from translation of dollar profits which more than compensated for European transaction losses. Sector Results Process Instrumentation The process instrumentation business produced a substantial boost in sales and profits. The improvement in performance was spread across the many application areas of the group and was achieved against a background of dull demand in some customer industries. The efforts in the recent past to develop new products and, of equal importance, to develop new applications, have clearly benefited operations such as Ircon, Beta LaserMike, Malvern and Fusion. The group continues to invest in this area and to invest in marketing and sales in rapidly developing geographical markets, notably in Asia-Pacific. The companies exposed to the semiconductor industry benefited from the strong recovery in demand as the cycle moved forward through the year. Our other businesses all made progress and the sector like-for-like growth figure of 23% included organic growth of 18% in the non-semiconductor related business. Operating margins in process instrumentation improved significantly in the second half. However, important as operating margin is, management will remain focused on building a group capable of delivering growth in both the short and longer term. Servomex, acquired in 1999, delivered an improved result as the petrochemical market started to show signs of life late in the year. Spectris Companies Considerable progress was made with the Spectris acquisition and its subsequent reorganisation. The head office has been eliminated and a sense of focus introduced into the four companies, all of which enjoyed satisfactory trading in the half year of ownership. Operating margins exceeded 10%, and the cost base will be further improved from shortened lines of communication following the elimination at the beginning of 2001 of the inherited sales matrix organisation. Peripheral operations, principally a speciality valve business, have been sold since the year end. Working capital utilisation is some way behind that of our existing operations and the restructuring should also move the working capital to sales ratio towards a 20% target. We are pleased with the progress made in integrating the Spectris businesses although they exhibit a seasonality bias towards the second half of the year. There are continuing opportunities which will be addressed, not only for internal efficiency improvement, but for greater market penetration in areas where the businesses are under-represented. Cumulative exceptional costs are not now expected to exceed £10m by end 2001 while expected full year savings are unchanged. Electronic Controls Electronic controls did well. Strong growth at Arcom in remote telemetry products, albeit with margins restrained by continued marketing investment, good new product-induced growth at Microscan and another solid performance from Red Lion Controls combined to deliver results consistent with those already reported in the first half. Filtration The performance relative to 1999 of the filtration segment was rather disappointing, reflecting tighter market conditions, particularly in the aerospace market. The units involved have produced consistently good sales and profits over a long period but have become progressively removed from the main focus of the group on the higher growth instrumentation and electronics sectors. It is felt that these businesses will prosper more effectively under owners more comprehensively involved in similar activities and we expect to dispose of the filtration businesses during the first half of this year. Corporate Identity At the AGM the board will be submitting a resolution to change the name of the company. Given the long and illustrious history of the business, the Fairey name is inextricably associated by many with UK aviation and engineering. The reshaping of the group makes it an appropriate time to adopt a name which reflects more closely the group's focus on providing innovative technology for the improvement of customers' performance worldwide. Spectris is the parent company name of the businesses acquired by Fairey last year. The name Spectris already has recognition in many global markets and provides the opportunity to adopt a name which, along with trademarks and website domains, the company already owns. It is therefore proposed that the company name be changed to Spectris plc, which reflects the transformation into a specialist technology based instrumentation and electronic controls group which has 90% of its business outside the UK. Board Appointments As announced in December, Sir Robin Biggam will be retiring from the Chairmanship and the Board after the forthcoming AGM and will be succeeded by John Poulter. Hans Nilsson will succeed him as Chief Executive at the same time. Outlook Overall, like-for-like orders in January and February were usefully ahead of those in the equivalent period of the prior year, although some specific US markets, particularly in semiconductors and electronics, are slowing down. However, our semiconductor activities now comprise less than 10% of the enlarged group and the acquisition of Spectris has provided a good geographical balance. In the absence of a prolonged US downturn affecting other economies, the strong momentum in the group, together with the continuing benefits from the Spectris acquisition, leads us to expect a further improvement in performance in 2001. - ENDS - A table of results is attached. Copies of this notice are available to the public from the registered office: Station Road, Egham, Surrey TW20 9NP CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2000 Continuing Operations Notes Existing Acquisitions Businesses Total Total sold businesses 2000 2000 2000 2000 1999 £'000 £'000 £'000 £'000 £'000 1 Turnover 328,642 129,444 5,899 463,985 275,275 Cost of sales (153,175) (57,759) (2,108) (213,042) (126,955) Gross profit 175,467 71,685 3,791 250,943 148,320 Operating costs (130,755) (66,021) (3,105) (199,881) (113,572) Operating profit: Operating profit before goodwill amortisation and exceptional items 44,255 13,706 686 58,647 35,325 Goodwill amortisation (1,108) (2,181) - (3,289) (577) 2 Exceptional items 1,565 (5,861) - (4,296) - Operating profit 44,712 5,664 686 51,062 34,748 Loss on sale of business (2,256) (2,256) - 1 Profit on ordinary 48,806 34,748 activities before interest Net interest payable (7,630) (5,210) Profit on ordinary 41,176 29,538 activities before taxation 3 Taxation (13,859) 2,159 Profit for the financial 27,317 31,697 year Dividends (12,832) (10,373) Retained profit for the 14,485 21,324 financial year 4 Basic earnings per share 26.3p 32.8p 4 Fully diluted earnings per 26.1p 32.8p share 4 Normalised earnings per 34.6p 22.4p share Dividends per ordinary 11.7p 11.0p equity share CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2000 1999 £'000 £'000 Profit for the financial 27,317 31,697 year Foreign exchange 7,949 (415) adjustments Total recognised gains and losses relating to the financial year (2,318) 54 32,948 31,336 GROUP BALANCE SHEET AS AT 31 DECEMBER 2000 2000 1999 £'000 £'000 Fixed assets Intangible assets 104,700 20,327 Tangible fixed assets 77,122 34,966 Other investments 9,451 5,574 191,273 60,867 Current assets Current asset investments 12,061 - Stocks 74,699 37,968 Debtors 139,463 60,918 Cash at bank 44,500 32,459 270,723 131,345 Creditors: due within one year Short term borrowing (42,507) (2,226) Other creditors (140,971) (66,106) (183,478) (68,332) Net current assets 87,245 63,013 Total assets less current liabilities 278,518 123,880 Creditors: due after more than one year Medium and long term borrowing (155,521) (94,548) Other creditors (147) (264) (155,668) (94,812) Provisions for liabilities and charges (11,348) (3,026) Net assets 111,502 26,042 Called up share capital 5,584 4,784 Share premium account 184,977 129,983 Merger reserve 3,053 3,053 Revaluation reserve 1,190 1,190 Capital redemption reserve 291 291 Profit and loss account (83,593) (113,259) Equity shareholders' funds 111,502 26,042 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2000 2000 1999 £'000 £'000 5 Net cash inflow from operating activities 53,894 38,258 Returns on investments and servicing of finance Cash generated by company held for resale 3,788 - Interest received 1,697 177 Interest paid (8,130) (5,482) Issue costs incurred on new loans (339) - (2,984) (5,305) Taxation (10,843) (1,540) Capital expenditure and financial investment Purchase of tangible fixed assets (10,885) (5,382) Sale of tangible fixed assets 5,036 1,688 Purchase of fixed asset investments (3,300) (759) (9,149) (4,453) Acquisitions and disposals Acquisition of subsidiary undertakings (125,054) (17,548) Bank overdraft acquired with subsidiary (44,467) (5,603) undertakings Proceeds from the sale of subsidiary undertakings 7,010 - Bank overdraft disposed with subsidiary 2,113 - undertakings Proceeds from the disposal of investments 3,152 4,877 (157,246) (18,274) Equity dividends paid (11,102) (9,987) Cash outflow before financing (137,430) (1,301) Financing Issue of shares 55,794 634 Repayment of loans (23,167) (154) New loans raised 78,334 18,000 110,961 18,480 7 (Decrease)/increase in cash in the year (26,469) 17,179 1. Segmental Analysis Profit before Turnover interest and tax Net assets 2000 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations: Electronic Controls 56,261 44,321 8,710 6,685 11,198 10,549 Process 237,469 185,258 29,770 21,155 68,316 64,545 Instrumentation Filtration Systems 34,912 36,392 5,775 7,066 9,169 7,558 328,642 265,971 44,255 34,906 88,683 82,652 Spectris Group 129,444 - 13,706 - 82,861 - Total ongoing 458,086 265,971 57,961 34,906 171,544 82,652 operations Businesses sold 5,899 9,304 686 419 - 1,300 Total continuing 463,985 275,275 58,647 35,325 171,544 83,952 operations Goodwill (3,289) (577) amortisation Operating (4,296) - exceptional items Loss on sale of (2,256) - businesses Net debt (153,528)(64,315) Intangible assets 104,700 20,327 Other ______ ______ _____ _____ (11,214)(13,922) Total 463,985 275,275 48,806 34,748 111,502 26,042 Goodwill amortisation of £1,108,000 relates to companies acquired within the Process Instrumentation division. The remainder relates entirely to the acquisition of the Spectris Group. Operating exceptional items of £ 323,000 arose within the Process Instrumentation division and a gain on a forward contract of £1,888,000 was realised centrally. The remaining operating exceptional items arose wholly within the Spectris Group. The loss on sale of business of £2,256,000 relates to the disposal of Imaging Technology Inc, a company previously reported within Electronic Controls. 2 Exceptional Items The operating exceptional items comprise: 2000 £'000 Redundancy and restructuring costs in existing businesses 323 Redundancy and restructuring costs in Spectris Group 5,861 Gain on forward currency (1,888) contract 4,296 3 Taxation The tax charge of £13,859,000 is stated net of a tax credit of £1,162,000 relating to operating exceptional costs incurred in the year of £ 4,296,000. The effective tax rate, excluding exceptional items and goodwill amortisation, was 29.4%. This reflects the geographical mix of profits in relatively high tax jurisdictions, such as the US, offset by the tax benefit arising from the deductibility of goodwill amortisation in the US which is not chargeable to the Group profit and loss account. Earnings per share 4 The calculation of basic earnings per share of 26.3p (1999:32.8p) is based on the Group profit of £27,317,000 (1999:£31,697,000) and on the weighted average number of 5p ordinary shares in issue during the year of 103.9 million (1999: 96.5 million). Normalised earnings per share is calculated as follows: Earnings Earnings per share 2000 1999 2000 1999 £'000 £'000 Pence pence Basic earnings and earnings per share 27,317 31,697 26.3 32.8 Basic earnings and earnings per share attributable to: Goodwill amortisation 3,289 577 3.2 0.7 Operating exceptional items 4,296 - 4.1 - Loss on sale of business 2,256 - 2.1 - Tax credit on operating exceptional (1,162) - (1.1) - items Tax release on profit on sale of - (10,703) - (11.1) business Normalised earnings and earnings per share 35,996 21,571 34.6 22.4 The normalised earnings per share is presented so as to show more clearly the underlying performance of the Group. The calculation of diluted earnings per share of 26.1p (1999: 32.8p) is based on the Group profit of £27,317,000 (1999:£31,697,000) and on the diluted weighted average number of 5p ordinary shares in issue during the year of 104.5 million (1999: 96.5 million). The basic weighted average number of 5p ordinary shares in issue is reconciled to the diluted weighted average number of 5p ordinary shares in issue in the following table: Weighted average number of 5p ordinary shares 2000 1999 '000 '000 Basic weighted average number of 5p ordinary shares 103,891 96,454 in issue Weighted average number of dilutive 5p ordinary 2,969 1,635 shares under option Weighted average number of 5p ordinary shares that would have been (2,318) (1,605) issued at average market value from proceeds of dilutive share options Diluted weighted average number of 5p ordinary 104,542 96,484 shares Comparative information has been amended in accordance with FRS 14, Earnings per share to reflect the bonus element of the rights issue and the consequent adjustment to the terms of the share options. 5 Reconciliation of operating profit to net cash inflow from continuing operating activities 2000 1999 £'000 £'000 Operating profit 51,062 34,748 Depreciation of tangible fixed assets 10,967 6,949 Amortisation of intangible assets 3,289 577 Profit on sale of tangible fixed assets (749) (396) (Increase)/decrease in stocks (3,658) 1,959 Increase in debtors (1,862) (2,012) Decrease in creditors (5,289) (2,816) Increase/(decrease) in provisions 134 (751) Net cash inflow from continuing operating activities 53,894 38,258 The net cash inflow from operating activities of £53,894,000 is stated net of cash outflows of £1,720,000 relating to operating exceptional items incurred in the year of £4,296,000. 6 Analysis of changes in debt Cash at Short term Long term Sub EBT Total bank loans and loans Total loan overdraft £'000 £'000 £'000 £'000 £'000 £'000 As at 1 January 32,459 (96) (94,548) (62,185) (2,130) (64,315) 2000 Cash flow 8,065 (34,534) (55,167) (81,636) - (81,636) Other non-cash - (49) - (49) - (49) movements Exchange 3,976 (5,698) (5,806) (7,528) - (7,528) movements As at 31 44,500 (40,377) (155,521) (151,398) (2,130) (153,528) December 2000 The EBT loan represents a loan to the Fairey Group plc Employee Benefit Trust which is guaranteed by Fairey Group plc. 7 Reconciliation of net cash flow to movement in net debt 2000 1999 £'000 £'000 (Decrease)/increase in cash in the year (26,469) 17,179 Cash effect of change in net debt (55,167) (17,846) Change in net debt resulting from (81,636) (667) cash flows Other non-cash items: Exchange movements (7,528) (1,889) Amortisation of issue costs (49) (37) Movement in net debt in the year (89,213) (2,593) Net debt at 1 January 2000 (64,315) (61,722) Net debt at 31 December 2000 (153,528) (64,315) 8. Company Information The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2000 or 1999 but is derived from those accounts. Statutory accounts for 1999 have been delivered to the Registrar of Companies, and those for 2000 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

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