Final Results

02 March 2016

Laird PLC Final Results

Underlying Profit before Tax up 16% to £73.1 million

Laird PLC today announces its final results for the year ended 31 December 2015.

1 Sterling figures have been translated at $1.53/£, the average exchange rate for the year (2014: $1.65/£).

2 Operating profit is stated before exceptional items (2015: £45.0m), amortisation of acquired intangible assets (2015: £13.2m) and gain or loss on disposal of businesses (2015: £nil).

3 Underlying profit before tax and underlying earnings per share are stated before exceptional items, amortisation of acquired intangible assets, deferred tax on acquired intangible assets, goodwill and US capitalised development costs, gain or loss on disposal of businesses and impact arising from the fair valuing of financial instruments.

4 Earnings per share is calculated on a weighted average number of shares of 267.2m (2014: 266.9m).

5 Organic revenue growth is calculated including the contribution from this year's acquisitions as if the acquisitions had been owned in the equivalent period in the prior year, and reflecting a full year contribution from prior year acquisitions in both periods.

6 Operating margin is calculated based on underlying profit.

Another year of strong financial performance and good organic growth

· 16% increase in underlying profit before tax to £73.1m (2014: £63.2m) despite more challenging markets in Q4.

· 5% organic5 increase in constant currency revenue.

· Good divisional performance benefiting from diverse mix of end markets:

o Wireless Systems: 12% organic5 constant currency revenue growth, driven by automotive/M2M applications.

o Performance Materials: 1% organic5 constant currency revenue growth, reflecting some softer markets in Q4.

· 5% increase in underlying operating profit in US$.

· Strong operating cash conversion of 95% (2014: 74%).

· Statutory profit impacted as expected by exceptional charge of £45.0m (2014, £0.7m gain), mainly relating to operating model redesign.

· Net debt at year end of £200.0m (2014: £159.5m) reflects £35.9m cost of acquiring LSR (including £1.5m of net debt acquired).

Continuing to deliver against our strategy

· Average of 7% organic US$ revenue growth p.a. over last three years.

· Strong performance in Wireless Systems underpinned by leading market positions.

· Significant progress made in the re-design of our operating model, on track to meet plan with $20m per annum of cash benefits from 2017.

· Successful acquisitions of LS Research (LSR) in the United States and Novero in Germany, adding new capabilities and opening up new markets and customers. The integration of both businesses is going to plan and their performance is encouraging.

David Lockwood, Chief Executive, commented:

"This has been another year of good growth in both revenue and underlying profits, with softer conditions in some markets being off-set by success in others. This demonstrates that our strategy of re-balancing our business through the diversification of customers and markets, has delivered a more robust and sustainable business. We expect this to be further enhanced by the redesign of our operating model as announced in October.

"We enter 2016 confident in our outlook for further growth. This confidence is underpinned by an increasingly well diversified mix of technologies, customers and end-markets. While internally we are in our best position for several years. Continued progress in Wireless Systems and the better markets within Performance Materials is countering headwinds in other areas. This, coupled with full year contributions from the LSR and Novero acquisitions and the positive benefits of our operational improvements supports our expectations for the year as a whole. We anticipate a progressive improvement in our performance during the year, with a steady first half performance and growth weighted towards the second half."

notes:

Laird is a global technology company focused on providing systems, components and solutions that protect electronics from electromagnetic interference and heat, and that enable connectivity in mission-critical wireless applications and antennae systems. We are a global leader in the field of innovative radio frequency ("RF") engineering.

An analyst presentation will be held today at 9.00am at The London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. A live audio webcast of the presentation will be hosted on www.laird-plc.com. A replay of the webcast will also be available on our website for two weeks after the event.

Performance Review

Delivering against our growth strategy

When I joined Laird in 2012 we established clear strategic objectives in order to grow our business. These were focused on customer diversification, selective acquisitions, and strategic differentiation through innovation, reliable fulfilment and speed. We have executed well against this strategy and as a result of this, 2015 has been another successful year with revenue up 12% in Sterling and up 5% on a constant currency basis. This represents an average of 7% organic revenue growth per annum for the last three years.

Connecting strategy and execution

Laird has made considerable progress in leadership development, culture, strategy and governance. We now have the clarity of strategy and organisational capabilities to tackle the last key foundation that underpins our business which is why we announced in October that we were redesigning our operating model.

The plan, to simplify our manufacturing capabilities in Europe and North America into our largest facilities thus reducing our footprint of 52 sites to 40 sites globally, will reinforce our ability to deliver reliable fulfilment and speed, while leveraging our cost base. By aligning and consolidating our regional design, engineering, sales and distribution activities closer to our customers we can drive innovation and further improve time to market. This simplification of our operating model will allow us to focus on key activities that support our differentiation strategy, and leverage common process and operational scale that facilitate our growth.

We have drawn upon on our extensive experience in setting up in new territories and expanding existing facilities to execute these changes. The programme is already underway which also underlines the progress we have made in our culture and leadership. As stated when we announced our plans in October 2015, we anticipate pre-tax cash costs to be up to $60m, to deliver this change, a significant investment in the Group, much of which will be treated as an exceptional cost. We will deliver pre-tax cash savings of at least $20m per annum, once fully implemented. We will self-fund this investment and there will be no impact on the dividend or any future acquisition plans.

diversifying our capabilities and capturing new markets

In November we acquired LSR, a wireless product design and development technology company based in North America, for £35.9m. This was successfully integrated into our existing M2M business within three months of the acquisition and is performing well. This acquisition delivers on our strategy of expanding our capabilities, products and services. It also provides us with new routes to market for our existing products meeting our objective for customer diversification.

In January 2016 we acquired Novero, a leading integrated vehicle connectivity systems provider based in Germany, for £47.1m. We are in the process of integrating Novero into our existing Telematics business. This acquisition enhances our offering of innovative wireless solutions in one of our core and fastest-growing markets, the connected car. We are now one of the leading global providers of end-to-end connectivity services both into and within the vehicle.

Both LSR and Novero meet our strategy by expanding our capabilities in wireless connectivity, and most importantly, both extend our reach, presence and capabilities in the Enterprise Internet of Things (EIoT) markets within the Connected Industrial and Connected Transport sectors.

As well as expanding our scope through acquisitions, we opened a new site in Brazil to support our expansion in South America - a site which is now operational and, under our new operating model, will serve a number of our businesses.

Markets

We have performed well across our five markets in 2015, capturing further market share in both Connected Transport and Mobile Devices and continuing to make progress with customers in Connected Medical. At the end of the year our business was well balanced with the majority of our revenue split across Connected Transport (28%), Telecoms/Computing (28%) and Mobile Devices (21%). Connected Industry and Connected Medical are still relatively small in terms of revenue (14% in total) but these are newer markets for us and both have significant scope for growth.

culture 

Laird has undergone a cultural transformation over the past three years and 'One Laird' is now a strongly embedded ethos within the entire organisation. This culture not only fosters the exchange of ideas and innovation that can lead to new product development and customer wins but it also fosters collaboration across functions and teams which means all employees have a sense of ownership. Our all employee share scheme saw take‑up of more than double the expected levels on launch which is testament to their commitment to the business.

Dividends

This year, the Board has proposed a 2015 final dividend of 8.6 pence (2014, 8.2 pence), resulting in a 4% increase in the total full year dividend to 13.0 pence per share (2014, 12.5 pence). The Board's expectation is to increase dividends ahead of inflation over time, whilst taking into account underlying profitability, the cash requirements of the business and potential investment opportunities to drive future growth. The final dividend will be payable on 6 July 2016 to shareholders on the register on 3 June 2016.

Outlook

We enter 2016 confident in our outlook for further growth and in our best position for several years. This confidence is underpinned by an increasingly well diversified mix of technologies, customers and end-markets. Continued progress in Wireless Systems and the better markets within Performance Materials is countering headwinds in other areas. This, coupled with full year contributions from the LSR and Novero acquisitions and the positive benefits of our operational improvements supports our expectations for the year as a whole. We anticipate a progressive improvement in our performance during the year, with a steady first half performance and growth weighted towards the second half.

Operational review

Wireless Systems

Over the year, organic revenue5 in US$ for Wireless Systems increased by 9.9% to $360.5m (2014, $328.0m). Operating profit2 grew by 14.8% to $46.5m (2014, $40.5m). Operating margin6 improved to 12.9% (2014, 12.3%). In Sterling1, total revenue grew by 18.5% to £235.6m (2014, £198.8m). Operating profit2 grew by 24.1% to £30.4m (2014, £24.5m). Revenue growth was driven in particular by a strong performance in the automotive segment.

The acquisition of LSR in late 2015 has helped to consolidate our position in EIOT markets. It has expanded our scope of supply by adding new capabilities, including testing, which further drives our differentiation through Innovation, Reliable Fulfilment and Speed. We also have the opportunity to service new markets in the light industrial and commercial sectors.

In our existing businesses, revenue from our Bluetooth offerings continued to grow with a number of high volume consumer product contracts confirmed. We were awarded an Electronic Component News (ECN) Impact award for Excellence in Boards, Modules and Embedded systems for our BT900 series Bluetooth modules. Our developing position within the Connected Medical sector continued with confirmed design wins for both Enterprise Wi-Fi applications and Bluetooth product lines.

Our leading position within the automotive sector was further strengthened this year with significant programme wins in Europe, China and the Americas. These wins were across both new and existing customers in a market where both volume and content demands are increasing year on year. The acquisition of Novero which completed after the close of the year will also give us access to new capabilities and new customers which will expand our product offering in this sector and further diversify our customer base.

Performance Materials

Over the year, organic revenue5 in US$ for Performance Materials was flat at $604.0m,(2014, $604.0m). Operating profit fell by 1.3% to $88.0m (2014, $89.2m), and operating margin6 was 14.6% (2014, 14.8%). In Sterling1, total revenue grew by 7.8% to £394.8m (2014, £366.1m). Operating profit2 grew by 6.3% to £57.5m (2014, £54.1m). Revenue growth was affected by the ongoing weakness in the telecoms and smartphone markets.

We continue to work closely with our customers responding to their requirements within tight timeframes, delivering innovative solutions on a consistent and timely basis. This allows our customers to innovate in their own products and is how we create and capture customer mindshare. For example, during the year we created a new, thinner and more adhesive insulation coating for one of our key customers. We delivered the solution within a tight timeline to enable it to be designed into the product launch without delays, delighting the customer and gaining positon on a flagship product. In addition to this our Vietnam factory is now operating at capacity and has enabled us to increase our share of business with a key customer.

We have also made progress in the Connected Transport sector, introducing a number of new products to solve EMI, thermal and structural issues for automotive electronics applications.

FINANCIAL REVIEW

Segments

In 2015, Laird had two segments; Wireless Systems and Performance Materials.

Revenue

In Sterling, revenue increased by 12% from £564.9m in 2014 to £630.4m in 2015. However, over 70% of our revenue is in US Dollar, and exchange rate movements mean only a 3% Group revenue increase in US Dollar with Wireless Systems revenues up 10% and Performance Materials revenues in line with 2014.

The table below shows revenue for each segment in US Dollar together with the incremental revenue contribution from acquisitions in 2014 and 2015.

Revenue on an organic basis was up 2%, defined as the increase in revenue, year-on-year, with the base revenue for the prior year including revenue from the newly acquired LS Research and the 2014 acquisition of Model Solution, as if Laird had owned these companies for the same period in the prior year.

Segmental revenue is also disclosed in note 3.

Revenue from the largest customer, amounted to 17% of revenue (2014: 18%). The top five customers accounted for 35% of revenue (including revenue invoiced indirectly through their suppliers) in 2015 (2014: 35%).

Underlying operating profit/operating margin

In Sterling underlying operating profit for Wireless systems for 2015 was £30.4m (2014: £24.5m) and for Performance Materials for 2015 was £57.5m (2014: £54.1m).

The table that follows shows underlying operating profit for the business segments in US Dollar for 2015 and the comparative data for 2014. The net operating margin was 12.8% (2014: 12.6%).

Operating margin for Wireless Systems improved to 12.9% (2014: 12.3%), which was mainly driven by savings on indirect overheads. Operating margin for Performance Materials was broadly in line with 2014 at 14.6% (2014: 14.8%).

The table below provides further analysis in US Dollar of the underlying operating profit. The gross profit percentage of 40.5% is 0.2% ahead of 2014 (40.3%).

R&D expenditure has increased by 2% to $83.4m from $81.9m.

Statutory loss/profit

Profit before tax from continuing operations was £15.4m (2014: £48.1m). The decrease reflects an exceptional charge to the P&L of £45.0m, offset by the increase in underlying profit before tax of £9.9m. In 2015, there was a statutory loss after tax of £7.6m, compared to a profit after tax of £50.2m in 2014 (a reduction of £57.8m). Along with the movement in PBT, the tax charge in 2015 is also £25.1m greater than in 2014 at £23.0m. It includes £8.3m in respect of exceptional items. The 2014 tax charge includes an exceptional deferred tax credit of £20.1m, as a result of the recognition of US tax losses.

Underlying profit and taxation

Underlying profit before tax in the year was £73.1m (2014, £63.2m). Underlying profit is defined as profit before tax, exceptional items, amortisation of acquired intangible assets, goodwill and US capitalized development costs, the gain or loss on sale of businesses and the impact arising from the fair valuing of financial instruments. The deferred tax impact of short-term losses and current tax on the amortisation of acquired intangible assets and goodwill are also included in the calculation of underlying tax.

The underlying tax charge on total underlying profit before tax is equivalent to an average tax rate of 18.2% (2014, 18.4%). Profits in the USA continue to be sheltered by amortised goodwill deductions resulting from acquisitions. Laird's tax payable largely arises in China, Czech Republic, Germany, Korea and Malaysia. During the year, Laird announced a redesign of its operating model. The exceptional tax impact of these proposals has resulted in a current tax charge of £8.3m.

Tax strategy

Laird operates with integrity in all tax matters, taking into account the needs of all relevant stakeholders. We will operate an effective tax control framework to ensure compliance with all relevant legislative and regulatory requirements, while maximising shareholder value in line with our stated commercial strategy.

The commercial strategy of the business is supported by tax aware, commercial decisions that are made in a timely manner. They provide a sustainable operating platform to the Group's commercial activities and are designed to ensure that the Group's tax obligations are consistently met whilst maintaining Laird's reputation for innovation.

Uncertainties relating to tax liabilities

 The global nature of the Group's operations and the presence of cross-border transactions present a complex tax environment with less certainty over the tax treatment of certain items. Laird engages with the relevant tax authorities to achieve certainty over the tax treatment but where this is not possible, or when dialogue is ongoing, a tax provision for uncertainty is sometimes needed. As the items in question can be complex and highly judgmental when assessing the need for, and the quantum of these provisions, Laird considers the status of tax audits, the outcome of previous similar claims, changes in tax law and the tax environment. Refer to note 2 for further information.

Future tax charge

It is expected that the underlying tax charge in 2016 will be in the range of 18% to 20%, subject to any unexpected changes to tax rates in the countries in which we operate.

Exceptional items

There was an exceptional charge of £45.0m in 2015, of which £39.0m is related to re-designing the Laird operating model, as announced in October 2015. £30.8m is cash related and will be paid out in 2016, £8.2m relates to asset write downs.

In 2014, there was a net exceptional credit of £0.7m in the year. There was an exceptional credit of £5.4m in respect of the Nextreme development project. This arose largely from the reassessment of the potential earn out provision, which was no longer required due to business performance. This was offset in part by a £3.6m provision for patents litigation costs and in part by acquisition transaction costs.

Exceptionals analysis

Finance costs

Finance costs, excluding a profit on the fair valuing of financial instruments of £0.5m (2014: £2.5m loss) were £7.6m, compared to £8.0m in 2014.

Underlying earnings

Continuing underlying basic earnings per share were 21.8p (2014: 19.1p). Underlying earnings are based on underlying profit less underlying tax and exclude deferred tax on acquired intangible assets, goodwill and US capitalised development costs. The average number of shares in issue throughout 2015 was 267.2m (2014: 266.9m).

Cash flow

The table below provides a further analysis of cash flow to complementthe notes to the financial statements.

Cash conversion (operating cash flow as a proportion of operating profit) for continuing operations in 2015 was 95% compared to 74% in 2014 (excluding a £4m investment in the new business in Vietnam and in the South Korean design centre). During the year, £35.9m was incurred on acquisitions, including £1.5m of net debt acquired.

Treasury policies

Laird has a centralised Treasury function, the objectives of which are to monitor and manage the financial risks of the Group and to ensure that sufficient liquidity is available to meet the requirements of the business. Group Treasury is not intended to be a profit centre and operates within a framework of policies and procedures.

Laird's Treasury uses derivative financial instruments to assist in the management of foreign exchange and interest rate risk, principally forward foreign exchange contracts and interest rate swaps. All hedging is carried out centrally and speculative trading is specifically prohibited by Group Treasury policy.

Interest rate risk

Laird is exposed to interest rate risk as it holds borrowings on both a fixed and floating basis. Our policy for this risk is to optimise the mix of fixed and floating rate borrowings using interest rate swaps and forward rate agreements to manage Laird's finance costs.

Credit and counterparty risk

Our policy on counterparty risk management is to place cash deposits and other financial instruments with its relationship banks, all of which also provide credit facilities to Laird. The level of exposure to each bank is continually monitored. As at 31 December 2015, all cash and short-term deposits had a maturity of less than three months.

Foreign exchange management

We aim to minimise our exposures to US Dollar transactional currency exposures by matching local currency income with local currency costs. Laird aims to forward cover at least 75% of the unmatched cash flows on a quarterly basis. Foreign currency borrowings are used partially to hedge the currencies of the Group's principal assets and cash flows. Where foreign currency borrowings are in the same currency as investment in overseas assets they are treated as a hedge of the net investment.

Net borrowings and debt facilities

Net borrowings were £200.0m (2014: £159.5m). A cornerstone of our financial planning is to ensure that it maintains committed loan finance which provides sufficient headroom above expected borrowing requirements and has a significant proportion with terms that exceed one year. Our committed bilateral revolving credit facilities total £255m, and will not expire until 2019. In addition, we have total US Private Placement notes of US Dollar $148m and Euro €15m outstanding:

Maturity on borrowings (excluding finance leases)

Balance sheet policy

Our policy is to manage a conservative Balance Sheet gearing position, with appropriate levels of debt for our business risk. This translates to a gearing target of 1.5-2.0x, although we are prepared to have a gearing of >2.0x, where we have a clear path to get to

Dividend policy

We have a progressive dividend policy, where we seek to grow the dividend above the rate of inflation but below the rate of earnings (EPS) growth. Thus, over time, we aim to bring dividend cover to >2.0x in the medium term.

Covenants

A key consideration for financial planning is to maintain sufficient headroom between borrowings and the ceiling set by the covenants. Our bank facilities and US Private Placement loan notes contain two principal financial covenants; net debt/EBITDA (earnings before exceptional items, interest, tax, depreciation and amortisation), and interest cover. For the year ended 31 December 2015, net borrowings were 1.7x EBITDA, 51% of the maximum permitted of 3.5x. Interest cover was 11.4x against the minimum requirement of 3.0x. Thus, there was considerable financial headroom. The expected headroom is routinely estimated against the covenants and the sensitivity to a number of alternative scenarios is tested to ensure ongoing compliance. The Group does not anticipate approaching its covenant limits in the foreseeable future.

Currencies in 2015

Local currency exposures are balanced where possible but the Group operates a global business and this creates currency imbalances where operating and procurement costs may not be able to be matched with revenues in local currencies.

In 2015, over 70% of revenues were negotiated in US Dollar. With under 50% of the cost base in US Dollar, there was a large US Dollar surplus. Over 10% of revenues were negotiated in Renminbi and just below 10% in Euros. In most currencies (other than US Dollar and Euro), costs exceed revenues, the most significant being the Renminbi (RMB) which accounts for over 30% of our cost base. This imbalance can lead to an adverse impact, in so far as the strengthening of the RMB may not be fully recovered in US Dollar selling prices.

In addition, there is a translation impact in converting profits into the Group's reporting currency (Sterling); each US$0.01 appreciation against Sterling approximates to an annual increase in operating profit of £0.44m. In 2015, on average through the year the US Dollar was stronger against Sterling than in 2014 and this increased underlying profit before tax on translation by £5.3m. However, the true economic impact of currency movements is much more complex than this, as currency considerations are factored into commercial negotiations by all supply chain participants on an on-going basis.

The majority of the Group's assets are held overseas and these are hedged in part by foreign currency loans.

Pensions

There are approximately 300 employees who are active members of defined benefit plans and approximately 1,400 deferred and current pensioners. There is an overall defined benefit pension scheme surplus under IAS 19 (Revised 2011) of £1.4m at 31 December 2015 (2014, £1.7m deficit). The principal driver of the year-on-year reduction in the deficit was a decrease in the scheme liabilities predominantly due to a decrease in forecasted salary increases from 4.2%-5.2% in 2014 to 3.2%-4.2% in 2015.

Shareholders' funds

Equity attributable to owners of parent company at the 2015 year end was £409.5m (2014, £441.4m). The reconciliation is set out in the Group statement of changes in equity.

Return on capital employed

Return on capital employed (underlying profit before interest and tax as a proportion of average shareholders' funds plus net borrowings during the year) was 12.4% in 2015, compared with 12.7% in 2014.

Statement of directors' responsibilities

The following statements are extracted from the Annual Report and Accounts 2015 and are repeated here for the purposes of compliance with DTR 6.3.5. These statements relate solely to the Annual Report and Accounts 2015 and are not connected to the extracted information set out in this announcement or the Preliminary Announcement.

Statement of directors' responsibilities in relation to the consolidated financial statements

Each of the directors, whose names and functions are listed in the Annual Report and Accounts 2015, confirm that, to the best of each person's knowledge and belief:

· the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Group's and the Company's performance, business model and strategy;

· the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

· the Strategic Report and the Directors' Report contained in the Annual Report include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face.

Statement of the directors' responsibilities in relation to the Company's financial statements

Each of the directors, whose names and functions are listed in the Annual Report and Accounts 2015, confirm that, to the best of each person's knowledge and belief:

· the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

· the Strategic Report and the Directors' Report contained in the Annual Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

By order of the Board

David Lockwood, OBE Tony Quinlan

Chief Executive Chief Financial Officer

1 March 2016

Group income statement

for the year ended 31 December 2015

* attributable to equity shareholders of the parent company

** before amortisation of acquired intangible assets, exceptional items, deferred tax on the amortisation of acquired intangible assets, goodwill and US capitalised development costs, the gain or loss on disposal of businesses and the impact arising from the fair valuing of financial instruments

Group statement of comprehensive income

for the year ended 31 December 2015

Group statement of changes in equity

for the year ended 31 December 2015

for the year ended 31 December 2014

for the year ended 31 December 2015

Group statement of financial position

as at 31 December 2015

The accounts were approved by the Board of Directors on 1 March 2016 and were signed on its behalf by:

D C LOCKWOOD

A J QUINLAN

Directors

Group cash flow statement

for the year ended 31 December 2015

1. Corporate information

Laird PLC (the Company) is a limited company incorporated and domiciled in the United Kingdom whose shares are publicly traded. The principle activities of the Company and its subsidiaries (the Group) are described in note 3.

The consolidated financial statements of the Group for the year ended 31 December 2015 were authorised for issue in accordance with a resolution of the directors on 1 March 2016.

2. Basis of preparation

(a) The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements.

(b) The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. The consolidated financial statements have been prepared in accordance with the accounting policies followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2015.

The financial information set out in this document does not constitute the Group's statutory accounts for the year ended 31 December 2015 or 31 December 2014. The annual report and financial statements for the year ended 31 December 2015 were approved by the Board of Directors on 1 March 2016 along with this preliminary announcement, but have not yet been delivered to the Registrar of Companies. The auditor's report on the statutory accounts for the year ended 31 December 2015 was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2014 have been delivered to the Registrar of Companies. The auditor's report on the statutory accounts for the year ended 31 December 2014 was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The 2015 annual report and financial statements, together with details of the Annual General Meeting, will be despatched to shareholders on 23 March 2016. The Annual General Meeting will take place on 29 April 2016.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement and impairment of goodwill, the progress of the project to redesign the company's operating model in respect of which exceptional provisions were established in 2015, the measurement of defined benefit pension assets and obligations, the measurement of income and deferred taxes and the measurement of put and call options in respect of non-controlling interests in subsidiaries.

The Directors continue to adopt the going concern basis for accounting in preparing the annual financial statements. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. 

3 Segmental analysis

Explanatory note:

The reportable segments for continuing operations (as defined by IFRS 8) are Performance Materials and Wireless Systems. The financial performance of each segment is shown here.

Performance Materials designs and supplies a range of EMI shielding materials, thermal management solutions, and signal integrity products to a wide variety of electronic devices and prototypes.

Wireless Systems designs and supplies a range of high specification wireless antennae, and machine-to-machine ("M2M") wireless modules for a number of markets including the infrastructure and automotive markets.

The Group did not have any inter-segment revenue in 2015 and 2014.

Revenue from one customer of the Performance Materials division and Wireless Systems division represents approximately £84.6m (2014, £83.3m) of the Group's total revenues.

Unallocated costs are central costs related to managing the parent company.

3 Segmental analysis (continued)

Unallocated assets in the above table include cash and cash equivalents, retirement benefits and other debtors.

Unallocated liabilities - other in the above table include liabilities for current tax, deferred tax, retirement benefits, dividends, provisions and other creditors.

Amortisation of software has been included under intangibles assets for the first time in 2015..

Geographic information

The Group managed its business segments on a global basis and the parent company is resident in the UK. The Group's operations are based in the following territories:

North America, Europe, Asia and Rest of World.

The revenue analysis in the table below is based on the location of the customer. The analysis of non-current assets is based on the location of the assets and for this purpose consists of property, plant and equipment and intangible assets.

Revenue from UK customers (the Company's country of domicile) was £14.5m (2014, £9.6m).

4 Operating profit before finance costs and tax  

Explanatory note:

This note sets out the material components of the "Operating profit" line on our Group income statement, including a detailed breakdown of the fees we paid to our auditor, Ernst & Young LLP, in respect of services they have provided to us during the year.

Note

(a) Included in selling, administration and other expenses is a £45.0m exceptional charge (2014, £0.7m credit) and £13.2m (2014, £13.3m) of amortisation relating to acquired intangible assets.

 (b) Included in research and development expenditure is £6.0m (2014, £4.8m) of amortisation in respect of capitalised development costs.

 (c) Cost of inventories recognised as an expense within cost of sales was £249.0m (2014, £226.4m).

* Total fees paid to the auditor were £2.1m (2014, £2.2m).

5 Exceptional items

Explanatory note:

Exceptional items are items of income or expense incurred outside the normal course of business, and are considered to be material and one-off in nature. This note provides a detailed breakdown of the "Exceptional items" line included on the Group income statement.

 Note

(a) In October 2015 the company announced a major re-design of its operating model which in particular includes the simplification of manufacturing capabilities in Europe and North America. In 2015 there are asset write downs of £8.2m and site rationalisation, closure and relocation costs of £30.8m associated with this project which are included within other restructuring costs above.

(b) A patent lawsuit filed against Laird in 2014 has been settled during 2015 with an additional £0.6m of legal costs charged in 2015.

(c) The total cash outlay for exceptional costs in 2015 was £7.6m (2014, £9.1m).

(d) The tax effect on exceptional items in 2015 is a £8.3m tax charge (2014, £2.6m).

(e) The changes in valuation of put and call options in respect of Model Solution include a £1.4m loss (2014, £0.7m gain) on a put option and a £0.4m loss (2014, £0.1m gain) on a call option.

6  Earnings per share

Explanatory note:

Earnings per share ("EPS") represents the amount of our earnings (post-tax profits) that are attributable to each ordinary share we have in issue. The calculation of basic and diluted earnings per share is based on the profit for the year divided by the daily average of the number of shares in issue during the year. Diluted earnings per share is based on the same profit but with the number of shares increased to reflect the daily average effect of relevant share options granted but not yet exercised where performance conditions have been met and shares contingently issuable.

* attributable to equity shareholders of the parent company

In 2015, instruments which could potentially dilute EPS in the future were not included in the calculation of diluted EPS because they are anti-dilutive for the current year.

7 Underlying results

Explanatory note:

Underlying profit and earnings per share are shown as the Board considers them to be relevant guides to the performance of the Group.

Underlying tax is stated before exceptional items, deferred tax on the amortisation of acquired intangible assets, goodwill and US capitalised development costs, the gain or loss on disposal of businesses and the impact arising from the fair valuing of financial instruments. The deferred tax impact of short-term losses and current tax on the amortisation of acquired intangible assets and goodwill are included in the calculation of underlying tax.

The underlying tax charge for the year is equivalent to 18.2% (2014, 18.4%) of underlying profit before tax.

** attributable to equity shareholders of the parent company

8 Dividends paid and proposed

Explanatory note:

Dividends are the amounts we return to our shareholders and are paid as an amount per ordinary share held.

On 1 March 2016 the Board declared, subject to approval from shareholders, a final dividend of 8.6p per share (2014, 8.23p). The final dividend will be paid on 6 July 2016 to shareholders registered on 3 June 2016. Dividends paid are charged to retained earnings on the earlier of the date of payment or the date on which they become a legal liability of the Company.

* attributable to the year 

9 Business combinations

Explanatory note:

This note provides both quantitative and descriptive information on acquisitions made by the Group in 2015 and 2014, including details of the acquisitions themselves, the net assets acquired and the consideration paid or payable.

Acquisition of businesses in 2015

On 24 November 2015, the Group acquired 100% of LS Research ("LSR"), a US based leader in wireless product design and development for a total consideration of £36.5m ($55.0m). This acquisition adds new capabilities in embedded wireless solutions and services to Laird, provides us with new routes to market for our own products and most importantly, extends our reach, presence and capabilities in Enterprise Internet of Things. This purchase has been accounted for as an acquisition and all intangible assets were recognised at their respective fair values. The fair values are provisional. The residual excess over the net assets acquired is recognised as goodwill in the financial statements.

Book and fair values of the identifiable assets and liabilities of LSR stated at rates of exchange at the date of acquisition, were as follows:

In the period following acquisition, revenue for LSR was £1.4m, there was a profit after tax of £nil and underlying profit before tax was £0.1m. If the acquisition had been held for the full year, Group revenues would have been £645.6m and the profit before tax would have been £1.4m higher at £16.8m. Included in the £24.3m of goodwill recognised above are certain assets that cannot be individually separated and reliably measured due to their nature. These items include the expected value of synergies. None of the goodwill recognised is expected to be deductible for income tax purposes.

9 Business combinations (continued)

Acquisition of businesses in 2014

On 17 April 2014, the Group acquired 51% of Model Solution Co.,Ltd ("Model Solution"), an unlisted South Korean company specialising in prototype design and manufacturing. The acquisition is in line with the strategy of diversifying both the Group geographic reach and customer base. An initial cash consideration of £20.5m was paid and a share of borrowings less cash and cash equivalents were acquired of £7.9m. This purchase has been accounted for as an acquisition and all intangible assets were recognised at their respective fair values. The residual excess over the net assets acquired is recognised as goodwill in the financial statements.

The Group has elected to measure the non-controlling interest in Model Solution as the proportionate fair value of net assets acquired.

Book and fair values of the identifiable assets and liabilities of Model Solution stated at rates of exchange at the date of acquisition, were as follows:

In the period following acquisition, revenue for Model Solution was £17.6m, there was a profit after tax of £0.5m and underlying profit before tax was £1.8m. If the acquisition had been held for the full year, Group revenues would have been £571.3m and the profit before tax would have been £0.5m lower at £47.6m. Included in the £10.7m of goodwill recognised above are certain assets that cannot be individually separated and reliably measured due to their nature. These items include the expected value of synergies. None of the goodwill recognised is expected to be deductible for income tax purposes.

9 Business combinations (continued)

In accordance with the Shareholders' agreement entered into between the Group and Skylake Consortium ("Skylake") to acquire Model Solution the Group and Skylake are respectively granted call and put options which entitle the Group to purchase from Skylake and Skylake to sell to the Group Skylake's 49% interest in Model Solution. The call options can be exercised by the Group on 17 April 2017, 2018 or 2019, and the put option can be exercised by Skylake on 17 April 2019 and if none of these options are exercised then the Group is committed to acquire the 49% interest in Model Solution on 17 April 2020. The exercise price for the call and put options will be determined in accordance with the Shareholders' agreement and will be between KRW 34.3bn (£20.1m) and KRW 92.7bn (£54.2m).

Financial liability - put option

The financial liability that may become payable under the put option was initially recognised at a fair value of £33.3m within non-current liabilities with a corresponding charge directly to other reserves, as a put option written on non-controlling interest. The put option liability shall be re-measured at its fair value resulting from the change in the expected performance of Model Solution at each balance sheet date, with any resulting gain or loss recognised in the consolidated income statement as an exceptional acquisition consideration related item. At 31 December 2015 the fair value was re-measured as £34.0m (2014, £32.6m) with a £1.4m charge (2014, £0.7m credit) recognised in the income statement. In the event that the put option lapses unexercised, the liability will be derecognised with a corresponding adjustment to equity.

Financial asset - the call option

There was a financial asset initially recognised of £1.0m within non-current assets in respect of the call option that the Group has over the non-controlling interests with a corresponding credit taken to goodwill. The call option asset will be re-measured at its fair value resulting from the change in the expected performance of Model Solution at each balance sheet date, with any resulting gain or loss recognised in the consolidated income statement as an exceptional acquisition consideration related item. At 31 December 2015 the fair value was re-measured as £0.7m (2014, £1.1m) with a £0.4m charge (2014, £0.1m credit) recognised in the income statement.

10 Additional cash flow information

Explanatory note:

Cash generated from operations is the starting point of our cash flow statement. This table makes adjustments for any non-cash accounting items to reconcile our result for the year to the amount of physical cash we have generated from our continuing operations.

Cash generation from operations