Interim Results
Spirent PLC
05 August 2004
833 - 5 August 2004
SPIRENT PLC
INTERIM RESULTS FOR THE FIRST HALF OF 2004
Spirent plc (LSE: SPT; NYSE: SPM), a leading communications technology company,
today announced its interim results for the first half of 2004.
Highlights
£ million First half 2004 First half 2003 Change %
(1) (1,2)
----------------------- ----------- ----------- -----------
Turnover 239.3 229.2 4
Operating profit (3) 21.6 15.4 40
Profit before tax and
amortisation (4) 18.6 13.1 42
Profit/(loss) before
tax 14.0 (9.3)
Earnings per share
(5) (pence) 1.41 1.02 38
• Reported turnover was up 4 per cent and operating profit (3) was up 40
per cent compared with the first half of 2003.
• Earnings per share (5) in the first half of 2004 increased by 38 per
cent to 1.41 pence.
• The effect of currency translation in the first half of 2004 reduced
turnover by £18.5 million, operating profit (3) by £1.9 million and
profit before tax and amortisation by £1.5 million.
• On a constant currency basis, turnover in the first half of 2004
increased by 12 per cent and operating profit (3) increased by 52 per cent.
• In the Communications group, turnover and operating profit (3) were up
in constant currencies by 18 per cent and 108 per cent, respectively, with
good growth in the Performance Analysis division more than offsetting lower
results from the Service Assurance division in the period.
• The Network Products group delivered a good performance with turnover up
14 per cent and operating profit (3) up 36 per cent in constant currencies.
Notes
1 First half 2004 refers to the period to 4 July 2004 and first half 2003 refers
to the period to 29 June 2003.
2 Results for the first half of 2003 have been restated to reflect the effect of
adopting Financial Reporting Standard 17 'Retirement Benefits' and Urgent Issues
Task Force Abstract 38 'Accounting for ESOP Trusts'.
3 Before goodwill amortisation and operating exceptional items.
4 In the first half of 2003, before exceptional items.
5 Earnings per share is based on headline earnings as set out in note 5 to the
interim report.
6 In constant currencies or on a constant currency basis means calculated at
constant exchange rates.
John Weston, Chairman, commented:
'We are encouraged by our results for the first half of 2004 which reflect the
benefit of our continued investment in product development and our ability to
capitalise on the continuing general improvement in our markets. We are
delighted to welcome Anders Gustafsson, our new Chief Executive. His extensive
telecoms industry expertise, substantial experience of international operations
and strong customer focus will be key as he leads the Group through the next
stages of its development.'
Commenting, Eric Hutchinson, Finance Director, said:
'The satisfactory start to 2004 continued into the second quarter and
performance in the first half of 2004 improved markedly over the first half of
last year.
'The Performance Analysis division has benefited from certain one-time orders in
the first half as well as increased customer investment in next-generation
technologies, which we believe is an important underlying long term trend. We
expect the performance of the Service Assurance division to remain subdued until
advanced IP services become more widely deployed and we successfully expand our
customer base. Our Network Products business is expected to continue to benefit
from general positive economic conditions but we expect it will revert to its
usual pattern of seasonality in 2004 with the second half result somewhat lower
than the first.
'Our commitment to product development throughout the downturn has positioned us
well and overall we believe this will enable us to continue on course for the
full year.'
- ends -
Enquiries
Eric Hutchinson, Finance Director Spirent plc +44 (0)1293 767676
Investor Relations
Catherine Nash Spirent plc +44 (0)1293 767676
Media
Jon Coles/Rupert Young Brunswick +44 (0)20 7404 5959
About Spirent
Spirent is a leading communications technology company focused on delivering
innovative systems and services to meet the needs of customers worldwide. We are
a global provider of performance analysis and service assurance solutions that
enable the development and deployment of next-generation networking technologies
such as broadband services, Internet telephony, 3G wireless and web applications
and security testing. Our Network Products business is a developer and
manufacturer of innovative solutions for fastening, identification, protection
and connectivity in electrical and communications networks marketed under the
global brand HellermannTyton. The Systems group comprises PG Drives Technology,
which develops power control systems for specialist electrical vehicles in the
mobility and industrial markets, and an aerospace business that provides
ground-based logistics support software systems for the aviation market. Further
information about Spirent plc can be found at www.spirent.com
Spirent Ordinary shares are traded on the London Stock Exchange (ticker: SPT)
and on the New York Stock Exchange (ticker: SPM; CUSIP number: 84856M209) in the
form of American Depositary Shares (ADS), represented by American Depositary
Receipts, with one ADS representing four Ordinary shares.
Spirent and the Spirent logo are trademarks or registered trademarks of Spirent
plc. All other trademarks or registered trademarks mentioned herein are held by
their respective companies. All rights reserved.
This press release may contain forward-looking statements (as that term is
defined in the United States Private Securities Litigation Reform Act of 1995)
based on current expectations or beliefs, as well as assumptions about future
events. You can sometimes, but not always, identify these statements by the use
of a date in the future or such words as 'will', 'anticipate', 'estimate',
'expect', 'project', 'intend', 'plan', 'should', 'may', 'assume' and other
similar words. By their nature, forward-looking statements are inherently
predictive and speculative and involve risk and uncertainty because they relate
to events and depend on circumstances that will occur in the future. You should
not place undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to factors that could cause our
actual results to differ materially from those expressed or implied by these
statements. Such factors include, but are not limited to: the extent to which
customers continue to invest in next-generation technology and deploy advanced
IP-based services; our ability to successfully expand our customer base; our
ability to continue to benefit from generally improving market conditions; the
prevailing market conditions and pace of economic recovery; our ability to
improve efficiency and adapt to economic changes and other changes in demand or
market conditions; our ability to develop and commercialise new products and
services, extend our existing capabilities in IP services and expand our product
offering internationally; our ability to attract and retain qualified personnel;
the effects of competition on our business; fluctuations in exchange rates and
heavy exposure to a weak US dollar; our ability to avoid a breach of our
financial covenants and to achieve certain financial requirements under our
renegotiated borrowing terms; changes in the business, financial condition or
prospects of one or more of our major customers; risks of doing business
internationally; the financial burden of our pension fund deficit; risks
relating to the acquisition or sale of businesses and our subsequent ability to
integrate businesses; our reliance on proprietary technology; our exposure to
liabilities for product defects; our reliance on third party manufacturers and
suppliers; and other risks described from time to time in Spirent plc's
Securities and Exchange Commission periodic reports and filings. The Company
undertakes no obligation to update any forward-looking statements contained in
this press release, whether as a result of new information, future events or
otherwise.
INTERIM REPORT FOR THE FIRST HALF OF 2004
Operating profit, return on sales and headline earnings per share are used by
the Group as key measures of operating performance and are stated before the
effect of goodwill amortisation and exceptional items so that period on period
comparisons are not distorted. Free cash flow (cash flow before acquisitions,
disposals, equity dividends and financing) is also a key measure.
Operating profit and return on sales in the text are stated before goodwill
amortisation and operating exceptional items. In constant currencies or on a
constant currency basis means calculated at constant exchange rates.
First half 2004 refers to the period to 4 July 2004 and first half 2003 refers
to the period to 29 June 2003. Results for the first half of 2003 have been
restated to reflect the effect of adopting Financial Reporting Standard 17
'Retirement Benefits' and Urgent Issues Task Force Abstract 38 'Accounting for
ESOP Trusts'.
Review of Operations
Communications
Change %
£ million First half 2004 First half 2003 Reported Constant
currency
--------------------- --------------- --------------- -------- --------
Turnover
Performance
Analysis 83.1 71.3 17 30
Service Assurance 42.0 46.2 (9) 1
--------- ---------
Communications
group 125.1 117.5 6 18
Operating profit
Performance
Analysis 7.1 0.5
Service Assurance 2.2 4.6 (52) (41)
--------- ---------
Communications
group 9.3 5.1 82 108
Return on sales (%)
Performance
Analysis 8.5 0.7
Service Assurance 5.2 10.0
Communications
group 7.4 4.3
The encouraging trends in customer spending seen in the first quarter of 2004
have continued throughout the second quarter and the overall performance of our
Communications group has improved markedly over the same period last year as a
result. On a constant currency basis, turnover increased by 18 per cent and
operating profit increased by 108 per cent compared with the first half of 2003.
Return on sales in the first half of 2004 improved to 7.4 per cent.
We have maintained our commitment to product development, investing £30.1
million, or 24 per cent of turnover, in the period (first half 2003 £28.5
million, 24 per cent of turnover). This investment has been directed at
next-generation technologies and at increasing the functionality, scalability
and automation of our products to help our customers improve the efficiency and
cost effectiveness of their test processes.
Performance Analysis
The Performance Analysis division achieved a 30 per cent increase in turnover on
a constant currency basis in the first half of 2004 relative to the first half
of 2003 reflecting certain one-time orders in the period and increased customer
spending on next-generation technologies. Operating profit of £7.1 million was
up materially over the first half of 2003 reflecting the increased volumes and
the benefits of cost savings made in 2003. Return on sales recovered to 8.5 per
cent for the period compared with 0.7 per cent in the first half of 2003.
In the first half of 2004 we achieved increased sales in constant currencies
across all our product groups compared with the first half of 2003. In
particular, our wireless business delivered increased sales of our CDMA-2000
test systems, driven by handset evolution and technology upgrades, and we saw
encouraging progress with our recently launched Wideband CDMA systems. New
products launched at the end of 2003 for testing Ethernet switches and routers
in enterprise local area networks also showed strong growth. Customers' concerns
over the security of enterprise networks and websites resulted in continued
demand for our web testing products which simulate virus and complex denial of
service attacks. We have been successful in addressing customers' needs in
relation to the development of advanced services over Internet Protocol (IP)
networks and are seeing increased demand for our voice-over-IP test solutions.
The recovery in the first half has largely been led by the US but sales to
customers in Europe and the Asia Pacific region have also increased over the
same period last year.
Our first half results in this division demonstrate that our sustained
investment in the development of new products and enhancements throughout the
downturn has enabled us to keep pace with customers' needs as they step up their
spending on next-generation technologies.
Service Assurance
Turnover for the division in the first half of 2004 was broadly flat in constant
currencies compared with the same period last year. Operating profit of £2.2
million for the period was substantially below the first half of 2003. While
gross margins have been maintained, return on sales reduced from 10.0 per cent
in the first half of 2003 to 5.2 per cent in the first half of 2004 due to our
increased investment in product development and marketing. We saw good growth in
sales of digital subscriber line (DSL) test heads in the period but sales of
digital leased line systems and monitoring contracts were down compared with the
first half of 2003. Our field test business saw growth over the first half of
last year driven by sales of its portable fault testers.
We continue to supply and support DSL and digital leased line monitoring systems
for major US service providers. However, as a result of increasing pressure on
profitability, our customers are maintaining tight controls on the cost of
providing DSL services and we continue to seek to increase the
cost-effectiveness of our systems. Customers are also increasingly focussing on
advanced IP-based services and in response we are investing in expanding our
capabilities in this sector and recently introduced our first monitoring and
diagnostic system for IP-based services. Given the importance of broadening our
customer base, we have increased investment in our marketing activities. In view
of these factors we expect this division's performance to remain subdued until
advanced IP services are more widely deployed and we successfully expand our
customer base.
Network Products
Change %
Constant
£ million First half 2004 First half 2003 Reported currency
--------------------- --------------- --------------- -------- --------
Turnover 95.0 85.9 11 14
Operating profit 10.7 8.1 32 36
Return on sales (%) 11.3 9.4
Our Network Products group delivered a good performance in the first half of
2004 with turnover of £95.0 million up 14 per cent in constant currencies over
the same period last year. Operating profit of £10.7 million was ahead by 36 per
cent in constant currencies over the first half of 2003 and return on sales
improved to 11.3 per cent from 9.4 per cent. In 2003 results for the second half
were ahead of the first half due to market recovery, but we expect to revert to
the normal seasonality of this business in 2004 with second half performance
being somewhat below the first half.
Our Network Products group benefited from the general economic recovery and
achieved growth in constant currency terms in all regions in the first half of
2004. Our strategy of providing innovative solutions and working closely with
customers on a global basis has enabled us to continue to increase sales in the
automotive market, with our products being specified on existing and new vehicle
platforms by automotive manufacturers and their first tier suppliers. Our sales
in the heavy vehicle market continued to be buoyant in both the US and Asia and
improved in Europe in the first half of 2004. The market for our communications
network systems saw some improvement in most regions but sales remain at
comparatively low levels. We have made progress with our local area network
products in the US where our emerging share of the market continues to grow.
We continue to expand our product range and in the first half of the year
launched several new products that will enable us to increase market and
customer penetration. Our capital expenditure has increased over last year as
planned as we are expanding capacity at our major manufacturing sites in order
to meet customer demand.
Systems
Change %
Constant
£ million First half 2004 First half 2003 Reported currency
--------------------- --------------- --------------- -------- --------
Turnover 19.2 21.0 (9) (3)
Operating profit 1.6 2.5 (36) (29)
Return on sales (%) 8.3 11.9
Figures in the above table relate to ongoing businesses only. Divested
businesses contributed £4.8 million of turnover and a £0.3 million operating
loss in the first half of 2003.
The overall results of our Systems group in the first half of 2004 were reduced
due to the effect of the weak US dollar, particularly on trading. On a constant
currency basis turnover was down 3 per cent and operating profit was down 29 per
cent. Return on sales reduced to 8.3 per cent compared with 11.9 per cent in the
first half of 2003.
In our power controls business, actions are being taken to mitigate the effect
of the weak US dollar on trading, including increasing the number of components
purchased in US dollars. A build up of inventory in the supply chain at the end
of 2003 and a reduction in US government healthcare funding in the powered
wheelchair market affected sales in the period. This was largely offset by
increased customer penetration with our VSI and S-Drive controller systems and
increased sales of our TRIO+ product in the small industrial vehicles market in
the first half of 2004.
The performance of our aerospace software business in the first half of 2004 was
stable, supported by orders from the military market, and the business delivered
a small profit for the period.
Financial Review
Change %
Constant
£ million First half 2004 First half 2003 Reported currency
--------------------- --------------- --------------- -------- --------
Turnover 239.3 229.2 4 12
Operating profit 21.6 15.4 40 52
Return on sales (%) 9.0 6.7
Reported turnover for the first half of 2004 was up 4 per cent and operating
profit was up 40 per cent compared with the first half of 2003. Reported results
have been affected by the weakness of the US dollar relative to sterling with an
average US dollar:sterling exchange rate of $1.82:£1 in the first half of 2004
compared with $1.61:£1 in the first half of 2003. In the first half of 2004
currency translation reduced turnover by £18.5 million, operating profit by £1.9
million and profit before tax and goodwill amortisation by £1.5 million compared
with the first half of 2003.
Turnover for the first half of 2004 of £239.3 million was up over the same
period in 2003 by 12 per cent in constant currencies. Operating profit before
goodwill amortisation and exceptional items of £21.6 million for the first half
of 2004 was up 52 per cent in constant currencies compared with the same period
in 2003.
Turnover by market and by source grew in constant currency terms in all
geographic regions during the first half of 2004. Operating profit in North
America grew by more than 100 per cent in constant currencies compared with the
same period in 2003. Operating profit also grew in the Asia Pacific region but
reduced by 2 per cent in constant currencies in Europe due to the effect of the
weak US dollar on trading.
Product development spending for the Group in the first half of 2004 was £33.7
million, or 14 per cent of turnover (first half 2003 £32.9 million and 14 per
cent), the majority of which has been in the Communications group.
There are no operating or non-operating exceptional items reported in the first
half of 2004, in contrast with the first half of 2003 which had operating
exceptional items of £4.9 million, in relation to the renegotiation of our
borrowing terms and cost reduction actions, and a non-operating exceptional
profit on divestments of £1.6 million.
The £0.2 million loss from interests in joint ventures in the first half of 2004
relates to our share of the losses in our start-up company in China, Spirent DM.
The income reported in 2003 also included our share of profits from WAGO which
was divested in April 2003.
Net interest payable in the first half of 2004 reduced to £3.6 million compared
with £5.0 million in 2003 due to the substantial reduction in net debt during
2003. In the first half of 2003 we reported an exceptional interest expense of
£14.3 million in relation to the make-whole amount on the partial prepayment of
our senior notes and related bank fees.
Reported profit before taxation was £14.0 million compared with a loss of £9.3
million for the first half of 2003.
The effective rate of taxation for the first half of 2004 was 28.0 per cent
compared with 27.7 per cent for the full year 2003.
Headline earnings per share of 1.41 pence increased by 38 per cent compared with
1.02 pence for the first half of 2003. The weighted average number of shares
outstanding at the period end was 937.2 million (full year 2003 929.3 million).
After charging goodwill amortisation and exceptional items, basic earnings per
share for the first half of 2004 was 0.92 pence (first half 2003 loss 1.27
pence).
In the first half of 2004 all our operating groups continued to be cash
generative. Operating cash flow of £19.9 million was generated (first half 2003
£28.6 million) after funding increased working capital requirements driven by
the improved activity in the Performance Analysis division and the Network
Products group. Free cash flow for the first half of 2004 was £1.9 million
compared with £1.0 million for the same period in 2003.
In the first half year we made our first additional annual cash contribution of
£3.5 million to our defined benefit UK pension plan and paid the liability of
£2.9 million net of taxes due to Mr Nicholas Brookes on his retirement in
respect of his unfunded unapproved retirement benefit (UURB). We also paid the
make-whole amount of £1.8 million due on the partial prepayment of loan notes
made in February 2004 (2003 £13.7 million).
We have increased capital expenditure as expected, investing a net £11.0 million
in the first half of 2004 compared with £6.3 million in the first half of 2003.
We expect capital investment for the year to be in the region of £25 million
(2003 £15.8 million).
As previously reported, on 18 February 2004 we pre-paid $14.4 million of our
senior notes. Following this, $129.8 million (£70.9 million) of the notes remain
outstanding. Our £30 million bank facility remained undrawn at the end of the
first half of 2004 and we had cash at bank and in hand of £30.5 million.
Net debt closed at £53.5 million (31 December 2003 £57.5 million). The US
dollar:sterling exchange rate at the period end benefited the net debt position
on translation by £2.1 million.
Earnings before interest, taxation, amortisation and exceptional items (EBITA
before exceptional items) to net interest expense was 5.0 times and net debt to
earnings before interest, taxation, depreciation, amortisation and exceptional
items was 0.86 times on a rolling 12 month basis, as calculated in accordance
with our borrowing covenants.
At the end of the first half of 2004 the pension liability net of deferred
taxation reduced to £24.7 million (31 December 2003 £35.2 million). The
liability has been reduced through the positive performance of the equity
markets, the Company's contribution of £3.5 million to the defined benefit plan
and the settlement of the UURB in respect of Mr Brookes.
Adoption of International Financial Reporting Standards
Spirent will be required to comply with International Financial Reporting
Standards (IFRS) with effect from 1 January 2005. The Company is in the process
of assessing the impact of conversion to IFRS and transition plans are on track.
For the Spirent Group we anticipate that the main areas to be impacted by the
adoption of IFRS will be the reporting and treatment of amortisation and
impairment of goodwill and intangible assets, share-based payments, research and
development, deferred taxation and financial instruments. The adoption of IFRS
will not affect our position under existing borrowing covenants as they are
calculated under UK GAAP.
The Board
We announced on 13 July 2004 that Anders Gustafsson had been appointed Chief
Executive of Spirent with effect from 2 August 2004. Mr Gustafsson has extensive
experience in the telecoms industry having held senior executive positions at
Tellabs, Inc., a leading US network equipment manufacturer, and Motorola, Inc.
His substantial experience of international operations, strong organisational
capabilities and customer orientation, and his sound strategic thinking will be
key in steering the Group through the next stages of its development.
Mr Nicholas Brookes retired as Chief Executive of the Company on 30 June 2004
and we wish him well for the future.
Outlook
The Performance Analysis division has benefited from certain one-time orders in
the first half as well as increased customer investment in next-generation
technologies, which we believe is an important underlying long term trend. We
expect the performance of the Service Assurance division to remain subdued until
advanced IP services become more widely deployed and we successfully expand our
customer base. Our Network Products business is expected to continue to benefit
from general positive economic conditions but we expect it will revert to its
usual pattern of seasonality in 2004 with the second half result somewhat lower
than the first.
Our commitment to product development throughout the downturn has positioned us
well and overall we believe this will enable us to continue on course for the
full year.
Consolidated profit and loss account
£ million Notes First half Year
------ ---------- -----
2004 2003 2003
restated
Turnover: Group and share of joint venture 239.3 251.6 488.6
Less: share of joint venture's turnover - (22.4) (22.4)
-------- -------- --------
Turnover 1,2 239.3 229.2 466.2
-------- -------- --------
Operating profit 1,2 17.0 5.7 18.8
------------------------------------------ ------ -------- -------- --------
Operating exceptional items 3 - 4.9 7.5
Goodwill amortisation 4.6 4.8 9.7
Operating profit before goodwill
amortisation and
exceptional items 1,2 21.6 15.4 36.0
------------------------------------------ ------ -------- -------- --------
Income/(loss) from interests in:
Joint ventures (0.2) 2.7 2.7
Associates 1.2 0.8 2.1
-------- -------- --------
Operating profit of the Group, joint
ventures and associates 18.0 9.2 23.6
Non-operating exceptional items
Profit on disposal of operations - 1.6 3.6
-------- -------- --------
Profit before interest 18.0 10.8 27.2
Net interest payable (3.6) (5.0) (9.3)
Other finance expense (0.4) (0.8) (1.5)
Exceptional interest payable - (14.3) (16.1)
-------- -------- --------
Profit/(loss) before taxation 14.0 (9.3) 0.3
Taxation 4 (5.2) (2.4) (0.6)
-------- -------- --------
Profit/(loss) after taxation 8.8 (11.7) (0.3)
Minority shareholders' interest - equity (0.2) (0.1) (0.2)
-------- -------- --------
Profit/(loss) attributable to shareholders 8.6 (11.8) (0.5)
-------- -------- --------
Basic profit/(loss) per share (pence) 5 0.92 (1.27) (0.05)
Headline earnings per share (pence) 5 1.41 1.02 2.31
Diluted profit/(loss) per share (pence) 5 0.90 (1.27) (0.05)
Consolidated statement of total recognised gains and losses
£ million First half Year
----------------- -------
2004 2003 2003
restated
Profit/(loss) attributable to shareholders 8.6 (11.8) (0.5)
Gain on lapsed options 0.6 0.9 1.2
Exchange adjustment on subsidiaries, joint
ventures and associates (3.2) 5.0 6.1
Taxation on exchange adjustment - (0.2) (0.2)
Reinstatement of deferred tax asset on
pension liability - 12.6 12.6
Actuarial gain/(loss) recognised on pension
schemes 6.0 (4.3) 0.3
Taxation on actuarial gain or loss (1.8) 1.3 (0.1)
--------- --------- ---------
Total recognised gains and losses 10.2 3.5 19.4
--------- --------- ---------
Consolidated balance sheet
£ million First half (1) Year
--------------------------------------------------
2004 2003 2003
restated
Fixed assets
Intangible assets 96.2 107.9 101.6
Tangible assets 85.5 101.4 90.2
Investments
Investment in joint
venture 0.3 0.3 0.3
Investment in associates 14.5 13.5 14.6
------ ------- ------
14.8 13.8 14.9
------- ------- -------
Total fixed assets 196.5 223.1 206.7
Current assets
Stocks 53.8 59.6 55.0
Debtors 94.7 87.8 86.9
Cash at bank and in hand 30.5 21.1 37.6
------- ------- ------
179.0 168.5 179.5
------- ------- ------
Current liabilities
Creditors due within one
year (113.4) (100.2) (111.3)
Loans and overdrafts (1.6) (3.4) (1.8)
------- ------- ------
(115.0) (103.6) (113.1)
------- ------- ------
Net current assets 64.0 64.9 66.4
------- ------- -------
Assets less current
liabilities 260.5 288.0 273.1
Long term liabilities
Creditors due after more
than one year (86.7) (120.9) (95.6)
Provisions for liabilities
and charges (15.9) (26.2) (20.2)
------- ------- -------
Assets less liabilities
(excluding pension
liability) 157.9 140.9 157.3
Pension liability (24.7) (37.6) (35.2)
------- ------- -------
Assets less liabilities
(including
pension liability) 133.2 103.3 122.1
------- ------- -------
Shareholders' funds -
equity 131.6 101.2 119.9
Minority interests -
equity 1.6 2.1 2.2
------- ------- -------
133.2 103.3 122.1
------- ------- -------
Note
1 First half 2004 refers to the position at 4 July 2004 and first half 2003
refers to the position at 29 June 2003.
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2003 statutory accounts. The interim
financial information 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 for
the year to 31 December 2003 is based on the statutory accounts for that period.
Those accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
The interim report for the first half of 2004 was approved by the directors on 5
August 2004.
Consolidated cash flow statement
£ million First half Year
------------------ ------
2004 2003 2003
Net cash inflow from operating activities 19.9 28.6 68.2
--------- --------- ----------
Dividends received from associates 0.1 - 0.1
Returns on investments and servicing of
finance (5.7) (19.0) (23.2)
Taxation (1.4) (2.3) 8.9
Capital expenditure and financial investment (11.0) (6.3) (15.8)
--------- --------- ----------
Cash inflow before acquisitions and
disposals, equity dividends and financing 1.9 1.0 38.2
Acquisitions and disposals (0.8) 60.7 60.4
Management of liquid resources - 0.1 0.1
Financing (7.7) (124.7) (143.6)
--------- --------- ----------
Net cash outflow (6.6) (62.9) (44.9)
--------- --------- ----------
Reconciliation of net cash flow to movement in net debt
£ million First half Year
----------------- ------
2004 2003 2003
Net cash outflow (6.6) (62.9) (44.9)
Cash outflow arising from the change in debt
and lease financing 8.6 125.2 144.3
Cash inflow arising from the decrease in
liquid resources - (0.1) (0.1)
--------- ---------- ---------
Movement arising from cash flows 2.0 62.2 99.3
Debt issue costs 0.2 (0.6) (0.8)
New finance leases (0.3) - (0.3)
Exchange adjustment 2.1 0.7 6.1
--------- ---------- ---------
Movement in net debt 4.0 62.3 104.3
Net debt at 1 January (57.5) (161.8) (161.8)
--------- ---------- ---------
Net debt (53.5) (99.5) (57.5)
--------- ---------- ---------
Notes to the financial information
First half 2004 refers to the period to 4 July 2004 and first half 2003 refers
to the period to 29 June 2003. Results for the first half of 2003 have been
restated to reflect the effect of adopting Financial Reporting Standard 17
'Retirement Benefits' and Urgent Issues Task Force Abstract 38 'Accounting for
ESOP Trusts'.
1. Segmental analysis
£ million First half Year
------------------ ----------
2004 % 2003 % 2003 %
restated
Turnover
Performance Analysis 83.1 35 71.3 31 148.7 32
Service Assurance 42.0 17 46.2 20 91.7 20
------- ----- ------- ----- ------- -----
Communications 125.1 52 117.5 51 240.4 52
Network Products 95.0 40 85.9 38 174.4 37
Systems 19.2 8 25.8 11 51.4 11
------- ----- ------- ----- ------- -----
239.3 100 229.2 100 466.2 100
------- ----- ------- ----- ------- -----
Operating profit
Operating profit before goodwill
amortisation and exceptional
items
Performance Analysis 7.1 33 0.5 3 4.4 12
Service Assurance 2.2 10 4.6 30 9.4 26
------- ----- ------- ----- ------- -----
Communications 9.3 43 5.1 33 13.8 38
Network Products 10.7 50 8.1 53 16.7 47
Systems 1.6 7 2.2 14 5.5 15
------- ----- ------- ----- ------- -----
21.6 100 15.4 100 36.0 100
------- ----- ------- ----- ------- -----
Operating exceptional items
Performance Analysis - (3.9) (5.1)
Service Assurance - - (0.1)
------- ------- -------
Communications - (3.9) (5.2)
Non-segmental - (1.0) (2.3)
------- ------- -------
- (4.9) (7.5)
------- ------- -------
Goodwill amortisation
Performance Analysis (2.0) (1.9) (3.9)
Service Assurance (2.5) (2.8) (5.5)
------- ------- -------
Communications (4.5) (4.7) (9.4)
Network Products (0.1) (0.1) (0.3)
------- ------- -------
(4.6) (4.8) (9.7)
------- ------- -------
Operating profit 17.0 5.7 18.8
------- ------- -------
2. Geographical analysis
£ million First half Year
------------------ ----------
2004 % 2003 % 2003 %
restated
Turnover by market
Europe 82.6 35 75.6 33 149.6 32
North America 116.0 48 113.7 50 229.3 49
Asia Pacific, Rest of Americas,
Africa 40.7 17 39.9 17 87.3 19
------- ----- ------- ----- ------- -----
239.3 100 229.2 100 466.2 100
------- ----- ------- ----- ------- -----
Turnover by source
Europe 91.6 38 83.9 36 168.2 36
North America 124.6 52 127.8 56 262.1 56
Asia Pacific, Rest of Americas,
Africa 23.1 10 17.5 8 35.9 8
------- ----- ------- ----- ------- -----
239.3 100 229.2 100 466.2 100
------- ----- ------- ----- ------- -----
Operating profit by source
Operating profit before
goodwill amortisation and exceptional
items
Europe 9.9 46 10.2 66 21.7 60
North America 10.5 49 5.0 33 13.0 36
Asia Pacific, Rest of Americas,
Africa 1.2 5 0.2 1 1.3 4
------- ----- ------- ----- ------- -----
21.6 100 15.4 100 36.0 100
------- ----- ------- ----- ------- -----
Operating exceptional items
Europe - (1.0) (2.3)
North America - (3.9) (5.2)
------- ------- -------
- (4.9) (7.5)
------- ------- -------
Goodwill amortisation
Europe (0.8) (0.7) (1.5)
North America (3.8) (4.1) (8.2)
------- ------- -------
(4.6) (4.8) (9.7)
------- ------- -------
Operating profit 17.0 5.7 18.8
------- ------- -------
Average exchange rates
US dollar 1.82 1.61 1.64
Euro 1.48 1.46 1.45
3. Operating exceptional items
Operating exceptional items were reported for the first half of 2003 of £4.9
million and for the full year 2003 of £7.5 million. These comprised finance
renegotiation and restructuring and related costs.
4. Taxation
£ million First half Year
---------------------------------
2004 2003 2003
restated
UK taxation - - 1.3
Overseas taxation 4.7 1.5 (2.7)
--------- --------- ---------
4.7 1.5 (1.4)
Share of joint venture's taxation - 0.5 1.1
Share of associates' taxation 0.5 0.4 0.9
--------- --------- ---------
5.2 2.4 0.6
--------- --------- ---------
5. Earnings per share
£ million First half Year
--------------------------------
2004 2003 2003
restated
Basic profit/(loss) attributable to
shareholders 8.6 (11.8) (0.5)
--------- --------- ---------
Operating exceptional items - 4.9 7.5
Goodwill amortisation 4.6 4.8 9.7
Profit on disposal of operations - (1.6) (3.6)
Exceptional interest payable - 14.3 16.1
Prior year tax credit - - (6.0)
Attributable taxation on exceptional
items - (1.3) (1.7)
Attributable taxation on the disposal of
operations - 0.2 -
--------- --------- ---------
Headline earnings attributable to
shareholders 13.2 9.5 21.5
--------- --------- ---------
Weighted average number of Ordinary
shares in issue - basic and headline
(million) 937.2 928.8 929.3
--------- --------- ---------
Weighted average number of Ordinary
shares - diluted (million) 958.2 928.8 929.3
--------- --------- ---------
6. Reconciliation of operating profit to net cash inflow from operating
activities
£ million First half Year
--------------------------------
2004 2003 2003
restated
Operating profit 17.0 5.7 18.8
Depreciation 13.0 15.0 29.3
Loss/(profit) on disposal of tangible
fixed assets 0.4 - (0.1)
Tangible fixed asset write-downs - - 2.2
Goodwill amortisation 4.6 4.8 9.7
Stock compensation expense 0.3 0.4 0.6
Deferred income received 4.6 1.3 0.2
(Increase)/decrease in debtors (10.2) 6.8 3.8
(Increase)/decrease in stocks (0.2) (0.4) 3.1
Increase/(decrease) in creditors 1.0 (3.7) 5.7
Decrease in provisions (3.4) (1.8) (5.9)
Pension liability (7.2) 0.5 0.8
--------- --------- ---------
Net cash inflow from operating activities 19.9 28.6 68.2
--------- --------- ---------
7. Net income/(loss) under US GAAP
£ million First half Year
--------------------------------
2004 2003 2003
restated
Profit/(loss) attributable to
shareholders in
accordance with UK GAAP 8.6 (11.8) (0.5)
--------- --------- ---------
Adjustments:
Goodwill and other intangible fixed
assets 0.2 (1.1) (0.7)
Stock-based compensation (1.7) (0.4) (0.9)
Disposal of operations - (0.2) (1.0)
Pension costs - 0.9 2.2
Derivative financial instruments (0.8) (1.0) (1.9)
Vacation payroll costs (0.4) (0.5) -
Deferred taxation on above adjustments 1.3 1.7 2.8
--------- --------- ---------
Total adjustments (1.4) (0.6) 0.5
--------- --------- ---------
Net income/(loss) as adjusted to accord
with US GAAP 7.2 (12.4) -
--------- --------- ---------
Net earnings/(loss) per share (pence)
Basic 0.77 (1.34) -
Diluted 0.75 (1.34) -
--------- --------- ---------
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 8 hours ago Alphawave IP Group
- 8 hours ago Judges Scientific
- 9 hours ago Alphawave IP Group
- 9 hours ago Taylor Wimpey
- 9 hours ago FDM Group (Holdings)