Interim Results

Spirent PLC 7 September 2000 REACHING NEW HEIGHTS Telecoms Testing Drives Rapid Growth Spirent plc, the international network technology company, today announces its Interim Results for the half year ended 30 June 2000. Highlights £ million Half year Half year Growth % 2000 1999 1999 Restated Turnover 316 252 25 Operating profit* 60 36 67 Profit before taxation** previous basis+ 59 45 31 Less deconsolidation of Interconnection 6 5 Profit before taxation** as reported 53 40 33 Headline earnings per share (pence) 5.76 4.39 31 Interim dividend per share (pence) 1.44 1.33 8 * Before goodwill amortisation of £9 million (1999 £1 million) ** Before goodwill amortisation as above and loss on disposals of £11 million (1999 nil) * Spirent Communications continues rapid growth: versus H1 1999, turnover increased 264 per cent to £114 million and operating profit rose 226 per cent to £39 million. Organic growth was 80 per cent in both. * Spirent Communications contributed 66 per cent of operating profit* for continuing businesses. * Investment in new product development rose 51 per cent to £25.7 million - 8.1 per cent of sales (H1 1999 £17.0 million, 6.7 per cent of sales). * Return on sales increased by 4.7 percentage points to 18.8 per cent. * +Financial results restated to show Interconnection as a joint venture. Reported earnings per share are unaffected. Commenting on the results, Nicholas Brookes, Chief Executive, said: 'The first six months of 2000 saw an outstanding performance by Spirent Communications, which through its rapid growth continues to drive the profound change in the overall profile of Spirent. It is therefore pleasing to note that we have now joined the FTSE 100. I would like to thank all of our people, whose efforts have been marked by the achievement of this milestone. 'Given the increasing investment being made by the telecommunications industry and the rapid pace of technological change, Spirent is well positioned to take advantage of future market potential. We look forward to a further strong performance during the second half of the year and beyond.' Enquiries: Nicholas Brookes, Chief Executive Spirent plc On 07/09/00 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 Spirent plc is an international network technology company providing state- of-the-art solutions with a focus on high growth, high margin activities. It is a world leader in advanced telecommunications testing systems and network products. 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 2000 INTERIM REPORT Overview The first six months of 2000 saw an outstanding performance by our Communications group. Through successful product development and the early rewards of its integration programme, Spirent Communications achieved organic growth in both turnover and operating profit of 80 per cent. The rapid growth of the Communications group continues to drive the profound change in the overall profile of Spirent. In the first half, Communications contributed 66 per cent of continuing operating profit before goodwill amortisation and loss on disposals of non-core businesses, compared with 37 per cent in the first six months of 1999. In recognition of this shift, Spirent plc was recently reclassified by the FTSE Global Classification Committee under the Information Technology Hardware (Telecommunications Equipment) sector. We are pleased to note that the company is also to enter the FTSE 100 index of leading quoted companies. Financial Review Turnover increased by 25 per cent to £316.4 million (1999 £251.7 million), while operating profit before goodwill amortisation and loss on disposals increased by 67 per cent to £59.6 million (1999 £35.5 million). Organic growth in turnover and operating profit was 24 per cent and 39 per cent respectively. Product development expenditure increased by 51 per cent to £25.7 million (1999 £17.0 million), a 1.4 percentage point increase to 8.1 per cent of sales. Return on sales increased by 4.7 percentage points to 18.8 per cent. Profit before taxation, goodwill amortisation and loss on disposals rose 33 per cent to £52.8 million (1999 £39.5 million). We have reviewed the accounting treatment for our 51 per cent interest in WAGO Kontakttechnik GmbH and WAGO Contact SA (Interconnection) in the light of the requirements under FRS9 'Associates and Joint Ventures'. The shareholder agreement with the minority shareholder has the effect of establishing joint rather than sole control. Accordingly, the financial reporting of the Group's interest in Interconnection has been restated from that of a consolidated subsidiary to a joint venture. We consider that this accounting treatment reflects a fairer representation of the financial results of the Spirent Group. Prior period results have been restated. Since Spirent's economic interest remains unchanged, there is no impact on the reported earnings attributable to shareholders or shareholders' funds. Profit before taxation, goodwill amortisation and loss on disposals on the previous basis would have been £59.1 million (1999 £44.9 million) were Interconnection fully consolidated. Headline earnings per share increased by 31 per cent to 5.76 pence (1999 4.39 pence). We continued our programme of divesting non-core operations through the sale of three companies, raising £8.8 million of cash proceeds. The reported loss on disposals of £11.0 million is after expensing goodwill previously charged to reserves of £14.6 million. Operating activities generated £48.7 million of cash, an increase of 61 per cent over the £30.2 million generated in the first half of 1999, reflecting the strength of cash generation by Spirent Communications. Cash inflow was £0.8 million (1999 £2.8 million outflow), before net expenditure of £23.7 million on acquisitions and acquisition-related earn- outs less divestment proceeds. Capital investment in the period was £13.6 million (1999 £20.6 million), a decrease of £7.0 million, reflecting the completion of the major programme of automation and facilities expansion in Network Products (formerly Cable Management). Cash advances of £20.0 million were made to the employee share ownership trust to purchase shares in Spirent plc in order to fund long term incentive plans. Net borrowings amounted to £346.8 million, an increase of £69.5 million in the period as a result of acquisition expenditure less divestment proceeds, earlier payment of the final dividend in June and retranslation of US dollar borrowings. Exchange rates had a negligible effect on the reported operating results. The interim dividend will increase by 8 per cent to 1.44 pence (1999 1.33 pence). This is payable on 9 November 2000 to shareholders on the register at the close of business on 13 October 2000. Shareholders may participate in the Dividend Reinvestment Plan. Operating Review Spirent Communications £ million Half Half Growth Organic year year growth 2000 1999 % % __________________________________ _______ _______ _______ _______ Turnover 114.0 31.3 264 80 Operating profit before goodwill amortisation 38.8 11.9 226 80 Return on sales 34.0% 38.0% Spirent Communications delivered an excellent performance during the first six months of the year. Through success with its integration strategy and continued commitment to product innovation, the group extended its position as a leader in the fast-growing communications test equipment market. Spirent Communications supplies key enabling products to communications equipment and service providers who create the Internet and corporate networks. On a proforma basis, if the businesses acquired in 1999 were taken into account, Spirent Communications would have had turnover of £61.3 million and operating profit of £20.7 million in the first half of 1999. Compared with the second half of 1999, turnover increased by 37 per cent to £114.0 million and operating profit rose 25 per cent to £38.8 million reflecting increased product development, marketing and business development activities. Important progress has been made in developing sales internationally in Asia Pacific and Europe. Compared with the second half of 1999, revenue investment in sales and marketing rose by £6.6 million to £21.7 million and in product development by £3.6 million to £13.5 million. These investments combined with increased business development activities have, as expected, reduced the return on sales by 4 percentage points to 34 per cent. We expect that the proportion of our profits derived from Spirent Communications will increase due to the growth in demand created by the global investment being made by the telecommunications industry and rapid technological change, both driven by the expansion in traffic over the Internet. The group has received a number of prestigious industry awards for recent product launches. In the 'Best of Show' awards at the May Networld+Interop trade fair in Las Vegas (widely regarded as the top awards in the communications industry), Spirent Communications products were named winner and runner-up in the Performance Test & Measurement category. Selected as category winner was Terametrics TM, a new open architecture foundation for our family of SmartBits LAN and IP test systems that enables the integration of third party test applications. In the same month, the Adtech AX/4000 broadband test system received another industry accolade in being named 'Product of the Year' in the Protocol Analyser category by Network Magazine, a leading technical publication. Integration of products from separate divisions of Spirent Communications has been achieved to create unique solutions for the rapidly growing ADSL and cable modem markets. We have seen growth in the early developments of 3G wireless testing. We were first to announce to the market a test solution that offers a 10 Gbps performance capability, our new Adtech OC- 192c system. This product puts us in a leading position in serving the fast growing terabit router market segment. Spirent Communications has entered into a strategic marketing alliance with Quallaby Corporation to supply network service providers with true carrier- class network management solutions. The alliance creates a powerful union of high-performance monitoring and analysis features offered by the Adtech SLAM TM (Service Level Agreement Monitor) system and Quallaby's PROVISO (Registered) 2.0 carrier-class software for network management and service assurance. The integration of our business under the Spirent Communications banner places us in a leading position in our market worldwide. A strong global management team has been put in place, alongside the integration of a unified worldwide sales force. The new share option incentive programme approved at the Annual General Meeting has been well received. It has assisted in the recruitment of new employees and enhanced our ability to retain our key people at all levels in an increasingly competitive global market. Staff turnover accounted for only 3 per cent of headcount in this period. Recent worldwide shortages of certain electronic components, such as flash chips and passive components, have not significantly impacted the group due to effective inventory and supply chain management. Spirent Network Products £ million Half Half Growth Organic year year growth 2000 1999 % % __________________________________ _______ _______ _______ _______ Turnover 90.2 77.4 17 11 Operating profit before goodwill amortisation 13.5 11.2 21 11 Return on sales 15.0% 14.5% The Cable Management group has been renamed Spirent Network Products to reflect more accurately its increased focus on network applications in all markets. The fastest growing segment of Network Products is its sales to the telecommunications market which have risen to 20 per cent of turnover during the first six months of 2000, up from 13 per cent for the whole of 1999. We expect this trend to continue through the development of new products. In February we acquired RW Data, a leading UK network products provider, which is performing well. Its wide product range, which includes systems for the proposed new Category 6 gigaband standard, makes it exceptionally well placed to serve installers of state-of-the-art Local Area Networks. We plan to broaden considerably its customer base through our global HellermannTyton sales channels, and already have new products under development for the American, Asian and European markets where they will complement our existing network product range. We expect the positive trend in organic growth in turnover for Spirent Network Products to continue, given the expansion of the market for LAN products. We have continued to see efficiency improvements resulting from the completion of our worldwide automation programme. Overall the US trading performance was strong. In Brazil impressive growth was achieved in the expanding domestic market. In the UK, efficiency improvements have assisted in countering the impact of the continued strength of sterling relative to the euro and the resulting weak UK domestic market. Our German operation, which relocated during the period to a new automated facility, delivered a strong performance across all the industries that it serves. Buoyant European performance in the first half year will further benefit from new product introductions. Our Japanese associate performed strongly, and we saw similarly good performance improvements from Singapore and China, in both the local and export markets. Spirent Systems £ million Half Half Change Organic year year change 2000 1999 % % __________________________________ _______ _______ _______ _______ Turnover 64.6 67.1 (4) (5) Operating profit before goodwill amortisation 1.1 3.8 (71) (69) Return on sales 1.7% 5.7% The results for Spirent Systems are being reported separately for the first time. Airline consolidation and the rationalisation by aircraft manufacturers have further delayed capital investment by the airline industry into major IT systems programmes, impacting our revenues this year. The decrease in profit is due to continued investment in product development, sales and marketing by our aerospace solutions business. This investment has led to the development of AuRA TM, the civil aviation version of our GOLD TM maintenance management software system. The new product, which will be delivered this month, will have a Windows-style interface, be web-enabled and offer a modular construction to allow customers to adopt the system in more manageable phases. Initial demonstrations of AuRA have been well received by customers including fast- growing US regional airlines such as Frontier and Sun Country. As a result of a procurement strategy review the US Air Force has changed its technical approach for the IMDS programme. We expect that the US Air Force will no longer fund the current IMDS deployment, including GOLD. We believe this will have no impact on other government funded programmes involving GOLD. GOLD is the solution of choice for a number of major prime contractors (including Lockheed Martin and Boeing) to support a wide range of US military programmes such as the US Air Force's C17 transport and the C5 programme, the US Navy's T-45 Goshawk and the more recent US Air Force F-22 aircraft. Elsewhere in Spirent Systems, we saw mixed performances among the power management and environmental businesses, but an improved contribution from the position controls operation. Spirent Sensing Solutions £ million Half Half Growth Organic year year growth 2000 1999 % % __________________________________ _______ _______ _______ _______ Turnover 43.5 34.5 26 12 Operating profit before goodwill amortisation 5.7 5.1 12 10 Return on sales 13.1% 14.8% The Sensing Solutions group performed well primarily due to growth in the biomedical products market, successful product launches and greater value added sales for European automotive and building management system applications. Humidity sensing sales benefited from a well received new family of industrial transmitters and the integration of distribution channels across our operations. Profits grew by 12 per cent notwithstanding our investment for expansion in Asia Pacific and Europe, which reduced return on sales. Through our joint ventures in Japan and Korea we are now positioned for solid growth in the important Asian markets. In India, where we achieved sales growth of 134 per cent, we have opened an additional facility to satisfy demand for our export business. In Europe, we are expanding our sales organisation for our pharmaceutical thermal validation systems and have recently launched European language versions of our industry-leading Validator 2000 TM system. We have strengthened our European humidity offering through the acquisition in March of Sontay Limited, a provider of controls peripherals for building management systems which offers expertise in LonWorks systems. Interconnection Joint Venture Our share of turnover increased by 14 per cent to £35.9 million and our share of operating profit increased by 20 per cent to £6.6 million. Interconnection is growing faster than the rest of its market due to the launch of new patented products over the past 12 months, which now contribute substantially to the overall sales result. Interconnection's digital I/O modules and electronic interface products are enjoying fast growth due to the winning of some important projects, particularly in the North American market. Geographic expansion has continued with strong growth in North America and Asia where our activities in mainland China continue to develop better than anticipated. Operating margins have improved as a result of volume growth, which has utilised the increased capacity installed through prior years' capital investment. Board In April, we were delighted to welcome Richard Moley to the Board as a non- executive director. Dick was founding Chairman, Chief Executive Officer and President of Stratacom Inc, a leader in the development of ATM switching and Frame Relay communications technologies. Following its acquisition of Stratacom in 1996, Dick joined Cisco Systems Inc as a member of the Board and Senior Vice President. He has subsequently retired from the company and is involved with a number of other communications ventures. He was a non- executive director of Netcom Systems Inc until mid 1999. Through his breadth of communications industry experience and knowledge, he has already made a marked contribution to the Board's deliberations. In June, we were saddened to learn of the death of Dr John Westhead, former Chief Executive of Bowthorpe plc. John exerted a tremendous influence on the development of our business. He put in place the foundation stones for Spirent to become the international network technology company it is today. Those of us who had the privilege to know and work with John can testify to his tremendous intelligence, energy and commitment. He will be sadly missed. People The excellent growth we have achieved during this period and our entry into the FTSE 100 are testaments to the dedication, ingenuity and determination of Spirent employees to deliver products and solutions that delight our customers. We would like to thank and applaud all our people worldwide for this outstanding performance. In our dynamic technology markets, speed-to-market is a critical concern. Our focus is to support our people to help them set new records. In addition to maintaining highly competitive incentivisation plans, we place great emphasis on creating positive working environments to encourage our people to act creatively and entrepreneurially. As a high technology business, our people are our greatest asset. We will continue to make Spirent an exciting and rewarding place for them to excel. Outlook Spirent's excellent first half performance, particularly from our Communications group, underlines the success of our strategy of focusing on high growth, high technology businesses. Given the increasing investment being made by the telecommunications industry and the rapid pace of technological change, Spirent is well positioned to take advantage of future market potential. We look forward to a further strong performance during the second half of the year and beyond. Consolidated Profit & Loss Account Year 31 £ million Notes Half year 30 June December ________________________________________________ __________ 2000 1999 1999 Continuing Operations as restated as restated (2) (2) Ongoing Ac- Dis- Total Total Total quisitions posals Turnover: group and share of joint venture 341.6 6.6 4.1 352.3 283.3 608.5 Less: share of joint venture's turnover (35.9) - - (35.9) (31.6) (64.0) _______ _______ ______ ______ _______ _______ Turnover 3 305.7 6.6 4.1 316.4 251.7 544.5 _______ _______ ______ ______ _______ _______ Operating profit 3 49.4 0.6 0.5 50.5 34.5 81.4 _______ ________ ______ ______ _______ ______ Goodwill amortisation 8.6 0.5 - 9.1 1.0 8.6 Operating profit before goodwill amortisation 58.0 1.1 0.5 59.6 35.5 90.0 _______ _______ ______ ______ _______ _______ Income from interest in joint venture 6.6 - - 6.6 5.5 9.5 Income from interests in associated undertakings 1.0 - - 1.0 0.7 2.3 _______ __________ ______ ______ __________ ________ Operating profit of the Group, joint venture and associated undertakings 57.0 0.6 0.5 58.1 40.7 93.2 Loss on disposal of operations - - (11.0) (11.0) - (6.7) _______ ______ ______ ______ ______ ______ Profit before interest 57.0 0.6 (10.5) 47.1 40.7 86.5 _______ ______ ______ ______ Net interest payable (14.4) (2.2) (12.8) ______ _______ ______ Profit before taxation 32.7 38.5 73.7 Taxation 4 17.3 12.8 30.2 ______ _______ _______ Profit after taxation 15.4 25.7 43.5 Minority shareholders' interest - equity 0.2 - - ______ _______ _______ Profit attributable to shareholders 15.2 25.7 43.5 Dividends 8.8 8.1 27.1 ______ ________ ______ Profit retained 6.4 17.6 16.4 ====== ======== ======= Basic earnings per share (1) 2.48p 4.22p 7.14p Headline earnings per share (1) 5.76p 4.39p 9.83p Diluted earnings per share (1) 2.38p 4.20p 6.84p Net dividend per share (1) 1.44p 1.33p 4.42p (1) Earnings and dividend per share for 1999 have been restated to reflect the three-for-one share split approved at the AGM on 11 May 2000. (2) The 1999 figures have been restated to reflect the change in accounting treatment in respect of the Group's interest in Interconnection (see note 2). If Interconnection had been accounted for as a subsidiary company profit before taxation would have been as follows: Profit before taxation, goodwill amortisation and loss on disposal of operations 59.1 44.9 98.1 _____ _____ _____ Consolidated Statement of Total Recognised Gains and Losses £ million Year Half year 30 June 31 December ____________________ __________ 2000 1999 1999 Profit attributable to shareholders 15.2 25.7 43.5 Exchange adjustment on subsidiary undertakings, joint venture and associated companies net of taxation 11.8 (2.0) (3.9) ________ ________ ________ Total recognised gains and losses 27.0 23.7 39.6 ======== ======== ======== The interim dividend is payable on 9 November 2000 to shareholders registered at the close of business on 13 October 2000. Consolidated Balance Sheet £ million 30 June 31 December _______________________ ________ 2000 1999 1999 as as restated restated (1) (1) Fixed assets Intangible assets 366.3 52.5 321.3 Tangible assets 113.9 108.8 107.0 Investment in joint venture share of gross assets 61.1 53.8 54.1 share of gross liabilities (22.3) (18.0) (19.2) ______ ______ ______ 38.8 35.8 34.9 Investment in associates 13.1 10.4 11.9 Other investments 31.9 5.6 12.3 _______ ________ ________ 564.0 213.1 487.4 _______ ________ ________ Current Assets Stocks 80.2 75.5 69.3 Debtors 137.8 100.2 115.2 Investments 21.6 3.3 51.0 Cash at bank and in hand 38.5 13.1 37.7 ______ ______ ______ 278.1 192.1 273.2 ______ ______ ______ Current liabilities Creditors due within one year 112.0 112.2 119.6 Loans and overdrafts 54.9 28.3 150.4 ______ ______ ______ 166.9 140.5 270.0 ______ ______ ______ _______ ________ ________ Net current assets 111.2 51.6 3.2 _______ ________ ________ Assets less current liabilities 675.2 264.7 490.6 Long term liabilities Creditors due after more than one year (377.0) (63.2) (234.6) Provisions for liabilities and charges (0.1) (2.9) (0.7) Accruals and deferred income (2.6) (0.9) (1.1) _______ ________ ________ Assets less 295.5 197.7 254.2 liabilities ======= ======== ======== Shareholders' funds - equity 291.1 194.9 250.3 Minority interests - equity 4.4 2.8 3.9 _______ ________ ________ 295.5 197.7 254.2 ======= ======== ======== (1) The 1999 figures have been restated to reflect the change in accounting treatment in respect of the Group's interest in Interconnection (see note 2). The Interim Report is unaudited but has been reviewed by the auditors. 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 Interim Report for the six months ended 30 June 2000 was approved by the Directors on 7 September 2000. Consolidated Cash Flow Statement Year £ million Half year 30 June 31 December 2000 1999 1999 as restated as restated (1) (1) Net cash inflow from operating activities 48.7 30.2 99.0 Dividends received and capital payment from/(to) joint venture and associated undertakings 1.2 (0.7) 1.5 Returns on investments and servicing of finance (9.8) (2.2) (9.9) Taxation (5.7) (9.5) (17.7) Capital expenditure and financial investment (33.6) (20.6) (39.8) __________ __________ ___________ Cash flow before acquisitions and financing 0.8 (2.8) 33.1 Acquisitions and disposals (23.7) (35.6) (232.9) Equity dividends paid (19.0) - (25.5) Management of liquid resources 30.4 2.7 (44.8) Financing 10.5 20.7 283.8 __________ __________ ___________ Net cash (outflow)/inflow (1.0) (15.0) 13.7 ========== ========== =========== Reconciliation of Net Cash Flow to Movement in Net Borrowings Net cash (outflow)/inflow (1.0) (15.0) 13.7 Cash (inflow) arising from the increase in debt and lease financing (7.9) (20.1) (277.5) Cash (inflow)/outflow arising from the decrease in liquid resources (30.4) (2.7) 44.8 ________ ________ _________ Movement arising from cash flows (39.3) (37.8) (219.0) Loans and finance leases acquired with subsidiary - (0.2) (27.2) Loan to acquire subsidiary (14.2) - - Loans and finance leases disposed - - 0.3 of with subsidiary New finance leases - (0.2) (7.3) Exchange adjustment (16.0) (2.0) 6.1 ________ ________ _________ Movement in net borrowings (69.5) (40.2) (247.1) Net borrowings at 1 January (277.3) (30.2) (30.2) ________ ________ _________ Net borrowings (346.8) (70.4) (277.3) ======== ======== ========= (1) The 1999 figures have been restated to reflect the change in accounting treatment in respect of the Group's interest in Interconnection (see note 2). Notes to the Financial Information 1. Basis of Preparation The Interim Report has been prepared on the basis of the accounting policies set out in the Group's 1999 statutory accounts. A prior year adjustment has been made to reflect the change in accounting treatment in respect of the Group's interest in Interconnection referred to below. 2. Change in Accounting Treatment and Prior Year Adjustment The Board has reviewed the accounting treatment for our 51 per cent interest in WAGO Kontakttechnik GmbH and WAGO Contact SA (Interconnection) in the light of the requirements under Financial Reporting Standard 9 'Associates and Joint Ventures'. The shareholder agreement with the minority shareholder has the effect of establishing joint rather than sole control. Accordingly, the financial reporting of the Group's interest in Interconnection has been restated from that of a consolidated subsidiary to a joint venture. The Board considers that this accounting treatment reflects a fairer representation of the financial results of the Spirent Group. Prior period results have been restated. Since Spirent's economic interest remains unchanged, there is no impact on the reported earnings attributable to shareholders or shareholders' funds, although the individual line items in the profit and loss account, balance sheet and cash flow statement are affected by the change in accounting treatment. 3. Analysis of Results £ million Half year 30 June Year 31 December _______________________ ______________ 2000 % 1999 % 1999 % as as restated restated Turnover by source Europe 94.3 30 84.7 40 166.0 35 North America 199.1 64 113.5 54 278.5 59 Asia Pacific, Rest of Americas, Africa 18.9 6 12.1 6 27.7 6 ________ ___ ________ ___ _________ ___ 312.3 100 210.3 100 472.2 100 === === === Divested operations 4.1 41.4 72.3 ________ ________ _________ 316.4 251.7 544.5 ======== ======== ========= Operating profit by source Europe 11.9 20 13.1 41 23.3 28 North America 45.8 77 18.8 59 61.2 72 Asia Pacific, Rest of Americas, Africa 1.4 3 0.1 - (0.2) - ________ ____ _______ ___ ______ ___ 59.1 100 32.0 100 84.3 100 === === === Divested operations 0.5 3.5 5.7 ________ ________ _________ 59.6 35.5 90.0 Goodwill amortisation (9.1) (1.0) (8.6) ________ ________ _________ 50.5 34.5 81.4 ======== ======== ========= Turnover by segment Communications 114.0 36 31.3 15 114.7 24 Network Products 90.2 29 77.4 37 155.4 33 Systems 64.6 21 67.1 32 130.0 28 Sensing Solutions 43.5 14 34.5 16 72.1 15 ________ ___ ________ ___ _________ ___ 312.3 100 210.3 100 472.2 100 === === === Divested operations 4.1 41.4 72.3 ________ ________ _________ 316.4 251.7 544.5 ======== ======== ========= Operating profit before goodwill amortisation by segment Communications 38.8 66 11.9 37 43.0 51 Network Products 13.5 23 11.2 35 21.5 26 Systems 1.1 2 3.8 12 8.7 10 Sensing Solutions 5.7 9 5.1 16 11.1 13 ________ ___ ________ ___ _________ ___ 59.1 100 32.0 100 84.3 100 === === === Divested operations 0.5 3.5 5.7 ________ ________ _________ 59.6 35.5 90.0 ======== ======== ========= Average exchange rates United States 1.57 1.62 1.62 Euro 1.63 1.49 1.52 4. Taxation £ million Year Half year 30 June 31 December ________________________ ___________ 2000 1999 1999 as as restated restated UK taxation 0.7 1.7 2.3 Overseas taxation 14.0 8.9 21.8 Tax arising on disposals - - 1.1 ________ _______ ________ 14.7 10.6 25.2 Share of joint venture and associated companies taxation 2.6 2.2 5.0 ________ _______ ________ 17.3 12.8 30.2 ======== ======= ======== 5. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities £ million Operating profit 50.5 34.5 81.4 Depreciation 11.3 10.5 21.9 Profit on disposal of tangible fixed assets (0.6) (0.1) (0.7) Amortisation of goodwill 9.1 1.0 8.6 Deferred income received/(released) 1.5 (0.1) 0.1 Increase in debtors (18.8) (9.2) (18.5) Increase in stocks (8.2) (4.0) (6.2) Increase/(decrease) in creditors 3.9 (2.4) 12.4 ________ ________ _________ Net cash inflow from operating activities 48.7 30.2 99.0 ======== ======== ========= Five Year History £ million As restated (2) Turnover Year 31 December __________________________________________ 1999 1998 1997 1996 1995 _____ _____ _____ _____ _____ Communications 114.7 52.4 30.8 13.4 3.5 Network Products 155.4 145.7 139.3 138.6 131.6 Systems 130.0 130.8 114.2 105.4 99.1 Sensing Solutions 72.1 57.8 51.0 51.6 38.0 _____ _____ _____ _____ _____ 472.2 386.7 335.3 309.0 272.2 Divested operations 72.3 83.5 97.5 106.8 93.7 _____ _____ _____ _____ _____ Total 544.5 470.2 432.8 415.8 365.9 ===== ===== ===== ===== ===== Operating Profit Communications 43.0 18.4 9.3 3.5 0.3 Network Products 21.5 20.2 20.0 22.0 19.9 Systems 8.7 14.5 12.1 11.4 8.5 Sensing Solutions 11.1 8.9 7.7 7.6 5.2 _____ _____ _____ _____ _____ 84.3 62.0 49.1 44.5 33.9 Divested operations 5.7 9.0 11.3 14.8 16.7 _____ _____ _____ _____ _____ Total 90.0 71.0 60.4 59.3 50.6 ===== ===== ===== ===== ===== Basic earnings per share (1) 7.14p 8.92p 8.74p 6.96p 7.67p Headline earnings per share 9.83p 9.07p 8.74p 8.33p 7.67p (1) Diluted earnings per share 6.84p 8.87p 8.72p 6.92p 7.62p (1) (1) Earnings per share has been restated to reflect the three-for-one share split approved at the AGM on 11 May 2000. (2) The figures have been restated to reflect the change in accounting treatment in respect of the Group's interest in Interconnection (see note 2).

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