Final Results
Spirent PLC
28 February 2001
Spirent plc
782 -28 February 2001
RECORD GROWTH
Spirent plc, the international network technology company, today announces
its audited Preliminary Results for the year ended 31 December 2000.
Highlights
£ million
2000 1999 Growth %
1999 Restated+
Turnover 697 545 28
Operating profit* 138 90 53
Profit before taxation* 125 89 40
Headline earnings per share
(pence) 12.61 9.18 37
Final dividend per share (pence) 3.00 2.89 4
+ Before goodwill amortisation and exceptional items
* Restated for share split, rights issue and to show Interconnection as a
joint venture
* Communications group increased turnover by 152 per cent to £289 million
1999 £115 million) and operating profit* by 129 per cent to £99 million
(1999 £43 million). Organic growth was 73 per cent and 68 per cent
respectively.
* 72 per cent of continuing operating profit* generated by Communications
group (1999 51 per cent, 1998 30 per cent).
* Record investment in new product development of £60 million - 9 per cent
of turnover (1999 £39 million - 7 per cent, 1998 £27 million - 6 per
cent).
* Systems group profit impacted by continued investment in aerospace
software development and on-going rationalisation among aviation
customers. First deliveries made of new commercialised aviation
software.
* Return on sales* increased by 3.3 percentage points to 19.8 per cent
(1999 16.5 per cent).
* Performance of Zarak Systems (acquired in September) and Hekimian
Laboratories (acquired in December) in line with expectations.
Commenting on the results, Nicholas Brookes, Chief Executive, said:
'Spirent's outstanding performance has been achieved through the excellence
of our innovative technology and our presence in the sweet spot of the
telecom market.
'Our communications business has shown encouraging growth for the first two
months of this year, despite the current well publicised telecom industry
uncertainties.
'We believe our customers will concentrate increasingly on next generation
high speed networks to remain competitive. We are uniquely positioned to
meet their critical needs on a global basis, with our extensive suite of
leading edge communications testing products and monitoring systems.
'Therefore, we expect Spirent to continue to outperform.'
The company disclaims any intention or obligation to revise or update any
forward-looking statements contained in this press release, regardless of
whether those statements may be affected as a result of new information,
future events or otherwise.
A recording of this morning's results presentation will be available for
viewing on the Spirent plc website (www.spirent.com/investors) from 15.00
London time (10.00 EST).
Nicholas Brookes and Eric Hutchinson will today host a results conference
call at 16.00 London time (11.00 EST). This may be accessed by dialling +44
(0)20 8240 8240 and quoting 'Spirent Results'. A recording of the call will
be available until 21 March by dialling +44 (0)20 8288 4459, access code
687642.
Enquiries:
Nicholas Brookes, Chief Executive Spirent plc On 28/02/01
Eric Hutchinson, Finance Director +44(0)20 7404 5959
Thereafter
+44 (0)1293 767676
Jon Coles/Rupert Young Brunswick London +44 (0)20 7404 5959
Sara Strong/Nina Pawlak New York +1 212 333 3810
Background Note:
Spirent plc is an international network technology company providing state-
of-the-art solutions with a focus on high growth, high margin activities.
Our Communications group unites leading edge performance analysis technology
with network operations expertise, enabling customers to accelerate the
development, deployment and assurance of next generation network equipment
and services worldwide. www.spirent.com
Spirent is quoted on the London Stock Exchange, ticker SPT. The Company
operates a Level 1 American Depository Receipt programme (ticker: SPNUY;
CUSIP number: 84856M100). For information, contact Brian Heston, The Bank of
New York, American Depositary Receipts, 101 Barclay St, 22 West, New York,
NY 10286 Phone: (212) 815 3938, Fax: (212) 571 3050, email:
bheston@bankofny.com www.adrbny.com
CHAIRMAN'S & CHIEF EXECUTIVE'S REVIEW
This has been a year of significant growth and achievement for Spirent plc.
Spirent Communications today unites leading edge performance analysis
technology with network operations expertise, enabling customers to
accelerate the development, deployment and assurance of next generation
network equipment and services worldwide.
Strategic Progress
In 2000, Spirent plc derived 72 per cent of its continuing operating profit
from its Communications group (1999 51 per cent, 1998 30 per cent), a clear
demonstration of the substantial progress we have made in refocusing our
business on high growth, high margin, high technology activities.
We continued to expand our technology portfolio through internal development
and acquisition. Our expertise across the full range of advanced
communications technologies has enabled our introduction of a new generation
of integrated test systems. These award-winning products directly address
the needs of the market and have confirmed our leading position in our
industry.
Our £1.17 billion acquisition of Hekimian Laboratories in December has taken
our Communications group into the highly complementary field of network
monitoring which helps ensure the optimal running of large scale, live
communications networks. The combination of Hekimian with our telecom test
business will enable us to play a leading role in the development of network
monitoring systems for next generation networks, a market expected to enjoy
strong growth over coming years.
We continue to move all our businesses up the value chain to position
Spirent at the leading edge of technology, where there are attractive
opportunities for differentiation and profitable growth.
Financial Performance
We achieved a strong financial performance, with turnover rising 28 per cent
to £696.7 million (1999 £544.5 million) and operating profit growing 53 per
cent to £137.9 million (1999 £90.0 million). Organic growth in turnover and
operating profit was 26 per cent and 31 per cent respectively.
Profit before taxation, amortisation and exceptional items increased 40 per
cent to £124.6 million (1999 £89.0 million). After charging goodwill
amortisation of £25.7 million and exceptional items, reported profit before
taxation was £81.8 million (1999 £73.7 million).
Headline earnings per share rose 37 per cent to 12.61 pence (1999 9.18
pence). Return on sales increased by 3.3 percentage points to 19.8 per cent
(1999 16.5 per cent), reflecting the increasing proportion of our earnings
arising from high margin communications activities.
Note: Operating profit as referred to in the text is stated before goodwill
amortisation and exceptional items
Operating Highlights
The year saw a very strong performance from our Communications group, with
turnover increasing by 152 per cent to £289.2 million (1999 £114.7 million)
and operating profit by 129 per cent to £98.6 million (1999 £43.0 million).
Organic growth in each was 73 per cent and 68 per cent respectively.
A series of highly successful product launches maintained Spirent
Communications' record for first-to-market innovation. These included a
number of integrated solutions that harness our expertise in multiple
technologies. Many of our latest products were recognised through major
industry awards including '2000 Product of the Year' by Internet Telephony
magazine, 'Best of Show' at the Networld + Interop trade fair in Atlanta and
'Most Innovative' product by InternetWeek magazine.
The integration of our telecoms test operations under the Spirent
Communications identity proceeded well, with close collaboration on product
development and the launch of a unified sales force and marketing programme.
A strengthened management team is well placed to drive the business forward.
In addition to internal development of new systems, we continued our
strategy to acquire 'best in class' companies in complementary technologies.
Hekimian has brought us an excellent market position in network monitoring
systems which help network operators meet their obligations of service
reliability, a critical concern in the development of next generation
networks and services. Net-HOPPER, acquired in November, complements
Hekimian's technology through its network test access systems. Zarak
Systems, acquired in September, added a leading position in voice testing to
our telecom test business and has strengthened our offering in the Voice
over IP market.
Our communications portfolio now addresses the full range of the technology
lifecycle, from component design through to network optimisation. This
establishes a broad and profitable base for our Communications business,
which is now the engine of Spirent's growth and development.
The Network Products group made good progress in developing its telecoms-
related business in 2000, which now represents 23 per cent of its turnover
(1999 13 per cent). The group's network application range was substantially
broadened in February through the acquisition of RW Data, a leading UK
manufacturer of network connectivity systems. Good progress has been made
in globalising this product range to capitalise upon our worldwide
HellermannTyton network.
The performance of the Systems group was principally impacted by our
continued investment in the development and commercialisation of our
aerospace information and software systems. The first versions of our civil
aerospace software were delivered to customers during the year. Our
performance was also negatively affected by continued airline consolidation
and rationalisation by aircraft manufacturers.
The Sensing Solutions group achieved good growth in turnover, although
operating profit was impacted by our investment in Korea and a slowdown in
the Heating Ventilation and Air Conditioning market.
Identity
In 2000 we responded to the needs of our markets and reflected the changing
nature of our business by launching the Spirent identity to replace a myriad
of unrelated trading names across our business. We now have a consistent
identity for businesses sharing common expertise and customers. Our new
identity has been well received by customers, employees, partners and
investors and has already proved to be of considerable commercial benefit.
Investment
We invested £60.3 million in new product development, an increase of 54 per
cent. New product development within our Communications group rose 140 per
cent to £34.7 million.
Net capital expenditure was £37.5 million (1999 £33.2 million). This
increase reflects the investment in providing suitable facilities and
equipment to facilitate growth in our rapidly expanding businesses.
Board and Senior Management
Following completion of the acquisition of Hekimian from Axel Johnson, we
were delighted to welcome as a non-executive director Goran Ennerfelt,
President and Chief Executive of Axel Johnson AB. As a result of the
acquisition, Axel Johnson has an 11.7 per cent shareholding in Spirent.
The Board was also strengthened in April through the addition of Richard
Moley as a non-executive director. Dick has brought extensive experience of
the communications industry from his successful career as founding Chairman,
Chief Executive Officer and President of Stratacom Inc and his subsequent
role as Senior Vice President and Board member of Cisco Systems Inc. Since
retiring from Cisco he has been involved with a range of communications
technology ventures.
Reflecting our increasing focus on communications activities, we have
appointed Barry Phelps, President of Spirent Communications' Telecom Test
division, and Des Wilson, President of the Network Monitoring division, to
the Operations Management team of Spirent plc. They join My Chung,
President of Spirent Communications.
Dividend
As indicated in the rights issue circular, the Board recommends a final
dividend of 3.00 pence, an increase of 4 per cent over that for 1999 (2.89
pence). This will give a total dividend for the year of 4.35 pence, an
increase of 5 per cent. The final dividend will be paid to shareholders
registered at the close of business on 11 May 2001.
People Inspiring Innovation
We are committed to maintaining Spirent as a dynamic and exciting
environment in which the best engineering talent can excel.
Through attractive training opportunities, investment in new product
development and competitive remuneration and incentives we are building on
our culture of technological innovation.
Our decentralised structure allows our businesses the maximum possible
flexibility. This encourages our people to keep close to their customers,
be responsive and achieve the leaps of imagination through which great
products and service can be realised.
Our principal strength lies in the dedication and ingenuity of Spirent's
employees. We would like to thank them for their achievements in meeting
the challenges of our markets and in contributing to the transformation of
Spirent to become a world leading network technology business.
Outlook
Spirents outstanding performance has been achieved through the excellence
of our innovative technology and our presence in the sweet spot of the
telecom market.
Our communications business has shown encouraging growth for the first two
months of this year, despite the current well publicised telecom industry
uncertainties.
We believe our customers will concentrate increasingly on next generation
high speed networks to remain competitive. We are uniquely positioned to
meet their critical needs on a global basis, with our extensive suite of
leading edge communications testing products and monitoring systems.
Therefore, we expect Spirent to continue to outperform.
OPERATING REVIEW
Communications
£ million Growth Organic
growth %
2000 1999 %
_____________________________________________________________________
Turnover 289.2 114.7 152 73
Operating profit 98.6 43.0 129 68
Return on sales (per cent) 34.1 37.5
The year saw significant growth and strategic progress by our Communications
group.
The Telecom Test division achieved turnover of £283.7 million, a rise of 147
per cent (73 per cent organic), and operating profit of £97.1 million, an
increase of 126 per cent (68 per cent organic). As advised at the Interim
stage, return on sales decreased as a result of our planned investment in
product development, marketing and business development activities.
Investment in new product development by the Communications group totalled
£34.7 million, an increase of 140 per cent.
The integration of the Telecom Test operations under the common identity of
Spirent Communications proceeded well. In addition to close collaboration
on product development, the operations successfully implemented a common
visual style to literature, websites, materials and products, and launched a
unified advertising programme. The new identity has been well received in
the market and is helping us raise awareness of our broad and highly
regarded product range. As a consequence, our integrated Telecom Test sales
force has made excellent progress in introducing our latest products to new
and existing customers.
The group continued to expand its technology portfolio through internal
development and acquisition. A series of successful product launches helped
Spirent Communications to maintain its record of first-to-market innovation
and further increase its array of industry awards. Honours received in the
year included '2000 Product of the Year' from Internet Telephony magazine
for the SmartVOIPQoS (trade mark) system, 'Best of Show' at the Networld +
Interop trade fair in Atlanta for the Layer 1 optical test system and 'Most
Innovative's product by InternetWeek magazine for the Gigabit Ethernet over
Copper SmartCard (trade mark). Other product innovations in the year
included systems for ATM OC-48, Quality of Service in all market areas, VDSL
line simulation, 2.5G and 3G wireless, and the first Packet over SONET OC-
192 test system.
The acquisition of Zarak added voice and telephony expertise to our existing
Telecom Test capabilities. This is enabling our development of new
performance analysis solutions for the fast growing Voice over IP market.
Note: Operating profit as referred to in the text is stated before
goodwill amortisation and exceptional items
Our acquisition of Hekimian has added a major new dimension to the group.
Hekimian is a leading US manufacturer of network monitoring systems that
help ensure that large scale, live networks function at optimal levels of
performance. This addresses a central concern of network operators who are
increasingly required to deliver specified levels of service to individual
customers, guaranteed by detailed Service Level Agreements. Hekimian has a
strong position in this market, with a well-established product portfolio
and strong relationships with incumbent and competitive network operator
customers.
Hekimian is complemented by the network test access technology of Net-
HOPPER. This provides non-intrusive access to network traffic and allows
these circuits to be tested by remotely sited performance analysis
equipment.
Hekimian and Net-HOPPER comprise a new Network Monitoring division within
Spirent Communications, which provides an exceptional strategic fit with our
existing Telecom Test capabilities. The Telecom Test division's focus on
the R&D labs of network equipment manufacturers gives the Network Monitoring
division visibility of new technologies coming down the line for deployment
in the network. Together, these divisions will enable Spirent
Communications to take a leading position in network monitoring systems for
next generation networks.
In the short period since the acquisition of Net-HOPPER in November and
Hekimian in December, the Network Monitoring division achieved turnover of
£5.5 million and operating profit of £1.5 million, a return on sales of 27.3
per cent.
The Communications group's senior management has been further strengthened
through several appointments. Des Wilson, formerly President & CEO of
Hekimian, has been appointed President of the Network Monitoring division.
Geoff Zeidler, Director of Business Development for Spirent plc since 1997,
has been appointed President of Europe and Wireless. Jim Schleckser
transferred from the Sensing Solutions group to become Vice President of
Business Development in North America.
Network Products
£ million Growth Organic
growth %
2000 1999 %
_____________________________________________________________________
Turnover 181.4 155.4 17 8
Operating profit 25.3 21.5 18 2
Return on sales (per cent) 13.9 13.8
The Network Products group made good progress in developing its telecoms-
related business in 2000, which at £41.1 million now represents 23 per cent
of its turnover (1999 £20.8 million -13 per cent).
The group's network application range was substantially broadened in
February 2000 through the acquisition of RW Data, a leading UK manufacturer
of network connectivity systems. Good progress has been made in globalising
this product range to capitalise upon our worldwide HellermannTyton
manufacturing and sales network. Successful product launches were held in
Germany in December and in the United States in January 2001 and further
market introductions are planned this year.
Our ability to serve direct customers and distribution partners on a
worldwide basis through our strong market position in all principal global
regions provided an important advantage in our sales drive.
We saw good growth in continental Europe and Brazil as a result of continued
success in automotive and industrial applications. Elsewhere, the downturn
in the US truck market depressed orders for our North American business.
The further weakening of the euro exacerbated the already challenging
conditions for UK exports.
Through our associated company in Japan we further strengthened our strong
market position which contributed to an excellent increase of 17 per cent in
our share of associates' profits.
Systems
£ million Change Organic
change %
2000 1999 %
_____________________________________________________________________
Turnover 122.4 121.4 1 (3)
Operating profit 2.5 8.5 (71) (68)
Return on sales (per cent) 2.0 7.0
The Systems group reported a reduction in operating profit, principally due
to our continued investment in the development and commercialisation of our
aerospace information and software systems. We also continued to see delays
in major capital investment by the aviation industry as a result of airline
consolidation and rationalisation by aircraft manufacturers. During the
year, we undertook a restructuring programme at a cost of £0.8 million.
The aerospace business took an important step in extending its software into
the civil market by launching AuRA (trade mark), a new version of its GOLD
(trade mark) Maintenance Repair and Overhaul (MRO) system. AuRA is
specifically designed to meet the needs of commercial customers and in 2000
was delivered to regional US carriers Sun Country, Frontier and most
recently USA 3000.
GOLD, the defence MRO system, was selected to support the US Air Force C5
and F22 programmes and is being adapted to offer additional functionality at
Boeing Military Aircraft and Missile manufacturing sites.
We also saw good progress in the development of our Aviation Information
Solutions business. This included sales to UPS and Atlas Airlines of our On-
board Performance Systems, which help pilots with a range of calculations
necessary for take-off and landing. FedEx took delivery of our Airborne
File Servers in order to improve the management of information and software
applications aboard its aircraft. KLM took delivery of our On-board
Maintenance Terminals to improve the efficiency of fault logging and
maintenance turnarounds.
The Systems group's position sensors business performed strongly in the year
with major aerospace sales to TRW Lucas, Embraer and Boeing. In addition,
our airborne smoke detection systems and in-flight entertainment power
supply business performed well throughout the year.
Our motion control business continued to perform strongly in the medical
mobility market, where it holds a leading position, and has successfully
transitioned its technology into the industrial mobility and access platform
market.
Sensing Solutions
£ million Growth Organic
change
2000 1999 % %
_________________________________________________________________________
Turnover 90.7 72.1 26 14
Operating profit 11.3 11.1 2 (2)
Return on sales (per cent) 12.5 15.4
The Sensing Solutions group achieved good growth in turnover although
operating profit was impacted through our investment in sales and marketing
in Korea, a slowdown in the Heating Ventilation and Air Conditioning market
and a one-off cost of £1.5 million from product line rationalisation
undertaken in the final quarter.
Good strategic progress was made during the year. We extended our humidity
sensing capabilities into the European building controls market. Additional
temperature capabilities were gained through a new venture with LG in Korea,
giving us access to world class infrared sensing technologies.
Our global presence and expertise in multiple technologies have helped us
secure several important contracts. We gained approval as a supplier to
Nissan in recognition of our co-ordinated temperature capabilities in the
United States, Europe and Japan. Following a group-wide marketing drive in
the automotive sensors market, we were selected to develop new relative
humidity and temperature sensors for Mack's latest diesel truck engines. We
were also able to capitalise on our reputation for automotive temperature
sensors to be selected by Delphi and Visteon to develop relative humidity
sensors.
We opened a new facility for our Korean temperature operation, establishing
a world class manufacturing base to expand the business domestically and
across Asia Pacific.
Interconnection Joint Venture
Our share of turnover increased by 13 per cent to £76.0 million (1999 £67.0
million) and our share of operating profit rose by 40 per cent to £13.3
million (1999 £9.5 million).
The business continued to trade well with healthy growth in most market
segments and positive customer reaction to its latest product launches.
FINANCIAL REVIEW
The substantial change in the profile of our business is clear from the
figures: 72 per cent (1999 51 per cent, 1998 30 per cent) of continuing
operating profit now comes from our Communications group. Figures for the
Communications business are broken down into its two divisions, Telecom Test
and Network Monitoring.
Total cost of acquisitions in 2000 was £1,543.9 million of which £984.7
million was paid in shares. This, together with the rights issue which
raised £522.7 million net of expenses, substantially strengthened our
balance sheet.
The changed shape of the balance sheet has reduced the ratio of borrowings
against shareholders' funds to 18 per cent. Net borrowings of £326.4
million represent 1.8 times reported earnings before interest, taxation,
depreciation, amortisation and exceptional items (1999 2.2 times). Reported
interest cover before amortisation and exceptional items was 5.3 times (1999
8.0 times). The reduction in cover reflects the full year impact of
borrowings drawn down in July 1999.
Financial Results
Headline PBTA
£ million 2000 1999
_______________________________________________________________________
Profit before taxation 81.8 73.7
Goodwill amortisation 25.7 8.6
Exceptional items:
Acquisition retention bonuses 2.2 -
Loss on disposal of operations 18.1 6.7
(Profit) on disposal of tangible fixed assets (3.2) -
_______________________________________________________________________
Headline profit before taxation 124.6 89.0
_______________________________________________________________________
Earnings before interest, taxation, depreciation, amortisation and
exceptional items rose by 45 per cent from £123.7 million to £179.0 million.
Goodwill amortisation increased from £8.6 million in 1999 to £25.7 million
this year, reflecting the full year impact of acquisitions made in 1999
together with those made in 2000. The goodwill charge for 2001 is expected
to be in the region of £92.4 million at current exchange rates. The loss on
disposal of £18.1 million (1999 £6.7 million) includes the reversal of £19.9
million of goodwill previously written off. The increase in net interest
charge from £12.8 million to £29.3 million reflects the full year impact of
the borrowings incurred to finance 1999 acquisitions.
Note: Operating profit as referred to in the text is stated before
goodwill amortisation and exceptional items
The effect of exchange rate translation was positive, increasing turnover by
£28.4 million and profit before taxation by £6.1 million.
Comparative figures for earnings per share and dividend per share have been
restated to reflect the impact of the 3 for 1 share split in May and the
bonus element of the 5 for 24 rights issue in December. Basic earnings rose
from 6.67 pence to 7.40 pence, an increase of 11 per cent, after charging
goodwill amortisation and exceptional items. Basic earnings benefited from
property disposals that realised a gain of £3.2 million and a £6.4 million
exceptional tax credit in respect of previously accrued purchase
consideration. Headline earnings per share grew 37 per cent, from 9.18
pence to 12.61 pence.
Trading Performance
The second half of 2000 showed the acceleration in positive trends in our
business and the effect of the acquisitions completed in the second half
year of Zarak, Net-HOPPER and Hekimian. This reflects the strong underlying
performance of the Communications business with organic growth in operating
profit over the first half year of 37 per cent and 63 per cent over the
second half of 1999.
The acquisitions contributed £29.8 million of turnover and £8.4 million of
operating profit in the second half year. On a proforma basis, taking into
account the full year results for the businesses acquired in 2000, Spirent
Communications' Telecom Test division would have had turnover of £305.3
million and operating profit of £106.3 million and Network Monitoring would
have had turnover of £121.3 million and operating profit of £30.3 million.
The results include a £2.2 million exceptional charge to operating expense
in respect of acquisition retention bonuses, arising out of acquisitions
made in 2000 which, although akin to purchase consideration, are regarded as
compensation under FRS7. The acquisition retention bonuses have been
excluded from headline earnings per share. The corresponding charges are
expected to be in the region of £9.0 million for 2001 and £6.0 million for
2002.
Taxation
The effective rate of taxation, after adjusting for goodwill amortisation
and exceptional items, decreased to 30.3 per cent (1999 32.7 per cent).
This is due to the tax benefit arising on the exercise of stock options by
US employees and a reduced tax burden in overseas jurisdictions. Given the
existing source of profits and prevailing exchange rates a sustainable rate
of 31 per cent is expected.
The reported rate of taxation at 37.4 per cent (1999 41.0 per cent) reflects
the one-off benefit of a £6.4 million tax credit on the deferred payment in
respect of the acquisition of Adtech.
Cash Flow
Cash Generation 2000 1999
£ million
_______________________________________________________________________
Net cash flow from operating activities 125.7 101.7
Less cash outflows on:
- Dividends and interest (net) (48.9) (37.0)
- Tax paid (22.2) (17.7)
- Capital expenditure (net of disposals) (37.5) (33.2)
- Capital repayment of finance leases (0.6) (1.5)
_______________________________________________________________________
Cash inflow 16.5 12.3
_______________________________________________________________________
High growth rates required increased investment in working capital. In the
second half year of 2000, £14.1 million was invested to fund working capital
as a result of growth. There has been no change in inventory turn in the
period and days receivable outstanding have improved.
Capital expenditure levels are expected to increase modestly in 2001.
Cash outflow on acquisitions was £549.7 million whilst cash inflow secured
from divestments was £13.1 million. Acquisition spend included £16.3
million for the final payment in respect of Adtech acquired in 1997. Cash
flow in 2001 will be impacted by the deferred cash payment of $20.0 million
in July in respect of Netcom.
The first tranche repayment of $24.0 million of term loan debt was made in
January 2001.
Cash advances of £22.0 million were made to the employee share ownership
trust to purchase shares in Spirent plc in order to fund incentive plans.
Dividend
The final dividend of 3.00 pence per share (1999 2.89 pence), as indicated
at the time of our recent rights issue, will result in the dividend for the
year of 4.35 pence per share being covered 2.4 times by headline earnings
(1999 2.2 times).
Consolidated Profit & Loss Account
Ongoing Acquis- Disposals Total Total
itions
2000 2000 2000 2000 1999
£ £ £ £ £
million million million million million
As
restated
(1)
Turnover: Group and share
of joint venture 723.3 36.4 13.0 772.7 611.5
Less: share of joint
venture's turnover (76.0) - - (76.0) (67.0)
======= ========= ========= ======= ========
Turnover 647.3 36.4 13.0 696.7 544.5
======= ========= ========= ======= ========
Operating profit 110.6 (0.8) 0.2 110.0 81.4
_________________________ _______ _________ _________ _______ ________
Exceptional item -
acquisition retention
bonuses - 2.2 - 2.2 -
Goodwill amortisation 17.6 8.1 - 25.7 8.6
Operating profit before
goodwill amortisation and
acquisition retention
bonuses 128.2 9.5 0.2 137.9 90.0
_________________________ _______ _________ _________ _______ ________
Income from interests in:
Joint venture 13.3 - - 13.3 9.5
Associates 2.7 - - 2.7 2.3
Exceptional items:
Loss on disposal of
operations - - (18.1) (18.1) (6.7)
Profit on disposal of
tangible fixed assets 3.2 - - 3.2 -
_______ _________ _________ _______ ________
Profit before interest 129.8 (0.8) (17.9) 111.1 86.5
_______ _________ _________
Net interest payable (29.3) (12.8)
_______ ________
Profit before taxation 81.8 73.7
Taxation 30.6 30.2
_______ ________
Profit after taxation 51.2 43.5
Minority shareholders'
interest - equity 0.1 -
Minority shareholders'
interest - joint venture 0.4 -
_______ ________
Profit attributable to
shareholders
Dividends: 50.7 43.5
Interim 8.8 8.1
Proposed final 27.3 19.0
_______ ________
Total dividends 36.1 27.1
_______ ________
Profit retained 14.6 16.4
======= ========
Basic earnings per share(2) 7.40p 6.67p
Headline earnings per
share (2) 12.61p 9.18p
Diluted earnings per share (2)
7.18p 6.39p
_______ ________
Net dividend per share (2)
Interim (2) 1.35p 1.24p
Proposed final (2) 3.00p 2.89p
_______ ________
Total dividend 4.35p 4.13p
======= ========
(1) The 1999 figures have been restated to reflect the change in accounting
treatment for the Group's interest in Interconnection.
(2) Earnings and dividend per share have been adjusted for the effect of the
bonus element of the rights issue and the 3 for 1 share split.
Consolidated Statement of Total Recognised Gains and Losses
2000 1999
£ £
million million
Profit attributable to shareholders 50.7 43.5
Exchange adjustment on subsidiaries, joint venture and
associates 8.8 (3.9)
Taxation on exchange adjustment (1.7) -
_______ _______
Total recognised gains and losses 57.8 39.6
======= =======
Consolidated Balance Sheet
2000 2000 1999 1999
£ £ £ £
million million million million
as as
restated restated
(1) (1)
Intangible assets 1816.8 321.3
Tangible assets 136.2 107.0
Investments
Investment in joint venture
Share of gross assets 64.5 54.1
Share of gross liabilities (23.8) (19.2)
_________ _________
40.7 34.9
Investment in associates 12.9 11.9
Other investments 33.4 12.3
_________ _________
87.0 59.1
Current assets
Stocks 136.2 69.3
Debtors 206.8 112.5
Investments 3.9 51.0
Cash at bank and in hand 28.6 37.7
_________ _________
375.5 270.5
_________ _________
Current liabilities
Creditors due within one year 199.6 119.6
Loans and overdrafts 19.8 150.0
_________ _________
219.4 269.6
_________ _________
Net current assets 156.1 0.9
_________ _________
Assets less current liabilities 2196.1 488.3
Long term liabilities:
Creditors due after more than (355.6) (233.4)
one year
Provision for liabilities and
charges (2.1) (0.7)
_________ _________
Assets less liabilities 1838.4 254.2
========= =========
Financed by:
Shareholders' funds - equity 1834.7 250.3
Minority shareholders' interest 3.7 3.9
- equity
_________ _________
Total equity 1838.4 254.2
========= =========
(1) The 1999 figures have been restated to reflect the change in accounting
treatment for the Group's interest in Interconnection.
Consolidated Cash Flow Statement
2000 1999
£ million £ million
as restated
(1)
Net cash inflow from operating activities 125.7 101.7
Dividends received from: - joint venture 1.1 1.3
- associates 0.4 1.1
Returns on investments and servicing of finance (22.7) (13.9)
Taxation (22.2) (17.7)
Capital expenditure and financial investment (59.5) (39.8)
Acquisitions and disposals (536.6) (232.9)
Equity dividends paid (27.7) (25.5)
Management of liquid resources 50.6 (44.8)
Financing 480.2 284.2
________ _______
Net cash (outflow)/inflow (10.7) 13.7
======== =======
Reconciliation of Net Cash Flow to Movement in Net Borrowings
Net cash (outflow)/inflow (10.7) 13.7
Cash flow from the change in debt and lease
financing 47.9 (277.5)
Issue costs on new long term loans - 2.7
Cash flow from the change in liquid resources (50.6) 44.8
________ _______
Movement arising from cash flows (13.4) (216.3)
Loans and finance leases acquired with (2.3) (27.2)
subsidiaries
Loan to acquire subsidiary (13.9) -
Loans and finance leases disposed of with
subsidiaries - 0.3
New finance leases (2.5) (7.3)
Exchange adjustment (19.7) 6.1
________ _______
Movement in net borrowings (51.8) (244.4)
Net borrowings at 1 January (274.6) (30.2)
________ _______
Net borrowings at 31 December (326.4) (274.6)
======== =======
(1) The 1999 figures have been restated to reflect the change in accounting
treatment for the Group's interest in Interconnection.
Analysis of Results
2000 1999
£ % £ million %
million
Segmental Analysis as
restated
(1)
Turnover
Telecom Test 283.7 41 114.7 25
Network Monitoring 5.5 1 - -
_______ ___ _______ ___
Communications 289.2 42 114.7 25
Network Products 181.4 27 155.4 34
Systems 122.4 18 121.4 26
Sensing Solutions 90.7 13 72.1 15
_______ ___ _______ ___
683.7 100 463.6 100
=== ===
Disposals 13.0 80.9
_______ _______
696.7 544.5
======= =======
Operating profit
Telecom Test 97.1 71 43.0 51
Network Monitoring 1.5 1 - -
_______ ___ _______ ___
Communications 98.6 72 43.0 51
Network Products 25.3 18 21.5 26
Systems 2.5 2 8.5 10
Sensing Solutions 11.3 8 11.1 13
_______ ___ _______ ___
137.7 100 84.1 100
=== ===
Disposals 0.2 5.9
_______ _______
137.9 90.0
Acquisition retention bonuses (2.2) -
Goodwill amortisation (25.7) (8.6)
_______ _______
110.0 81.4
======= =======
Geographical Analysis
Turnover by source
Europe 183.3 27 160.3 35
North America 461.7 67 275.6 59
Asia Pacific, Rest of Americas, Africa 38.7 6 27.7 6
_______ _______
683.7 100 463.6 100
=== ===
Disposals:
Europe 6.0 29.3
North America 7.0 48.5
Asia Pacific, Rest of Americas, Africa - 3.1
_______ _______
696.7 544.5
======= =======
Operating profit
Europe 19.4 14 22.8 27
North America 115.9 84 61.5 73
Asia Pacific, Rest of Americas, Africa 2.4 2 (0.2) -
_______ ___ _______ ___
137.7 100 84.1 100
=== ===
Disposals:
Europe 0.5 2.3
North America (0.3) 3.6
_______ _______
137.9 90.0
Acquisition retention bonuses (2.2) -
Goodwill amortisation (25.7) (8.6)
_______ _______
110.0 81.4
======= =======
(1) The segmental and geographical analyses have been restated to reflect
the change in accounting treatment in respect of the Group's interest
in Interconnection and the effects of disposals.
The above financial information does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The comparative financial
information, as restated, is based on the statutory accounts for the
financial year ended 31 December 1999. Those accounts, upon which the
auditors issued an unqualified opinion, have been delivered to the Registrar
of Companies. The statutory accounts for the year ended 31 December 2000,
which include an unqualified audit report, will be circulated to
shareholders on 26 March 2001.
The Annual General Meeting will be held on 9 May 2001 and subject to the
approval of the shareholders the final dividend will be paid on 4 June 2001
to shareholders registered at the close of business on 11 May 2001.
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