Final Results

11th Mar 2009 07:00



LAIRD PLC

AUDITED RESULTS

FOR THE YEAR TO 31 DECEMBER 2008

	2008	2007
	£m	£m
Revenue from continuing operations	635.3	564.3	+ 13%
Underlying profit before tax from continuing operations(i)	60.6	72.4	- 16%
Profit before tax from continuing operations	26.5	51.5	- 49%
Net borrowings	139.5	85.4
Shareholders' funds	585.3	448.5
	p/share*	p/share*
Underlying earnings from continuing operations (i)	27.4	33.1	- 17%
Basic earnings from continuing operations	8.1	21.4	- 62%
Dividend (ii)	11.88	11.5	+ 3%

Summary

Strong growth in revenue and profits in the first half of 2008, with subsequent results impacted by the global economic downturn and associated de-stocking in the global supply chain, particularly in the fourth quarter.

Business repositioned to operate successfully in the changed economic and market environment. Prompt actions taken to lower operating costs, with total headcount reduced by some 5,000 (approximately 33%) between October 2008 and January 2009.

Underlying profit before tax from continuing operations down 16% at £60.6 million (2007: £72.4 million), largely as a result of lower volumes in the second half.

Operating cash flow from continuing operations up 23% at £48.1 million (2007: £39.2 million). Increase in borrowings due largely (£38.9 million) to the translation effect on our US$ borrowings caused by the strengthening US dollar.

Sound financial structure maintained; interest cover for the year of 8.2 times; net debt: EBITDA 1.8 times, well within covenants. Debt facilities in place through 2012.

Continuing investment in technology development; R&D % of sales increased to 6.1% (2007: 4.5%), further strengthening our technology capabilities and enhancing our competitive position. 725 active patents in 2008, up 19% (2007: 610).

Full year dividend up 3% at 11.88 pence (2007: 11.5 pence, in addition to special dividend of 50 pence). Final dividend maintained at 7.88 pence.

Peter Hill, Chief Executive, said:

"In the first half of 2008 revenue and profits grew strongly. As the year progressed the extremely challenging economic environment affected all of our end-user markets and resulted in a marked fall off in demand for our products. While these macroeconomic conditions and de-stocking in the global supply chain have, as expected, continued into 2009, we have not seen any further deterioration in our revenues this year, although visibility remains limited. However, we still expect first half results to be considerably below the very strong levels seen in the first half of 2008.

We have a flexible business model with excellent customer relationships and a strong technology base. The long term fundamentals of our markets are attractive, our financial position is strong, and we remain confident about our strategy. We have taken swift action to position the business to weather the downturn, and will continue to ensure that Laird maintains its competitive position and emerges from this economic cycle well placed to capitalise on the opportunities provided by the evolving communications environment."

Explanatory notes:

i)	Laird uses underlying results as key performance indicators. Underlying profit before tax and underlying earnings per share are stated before exceptional items, the amortisation of acquired intangible assets, deferred tax on acquired intangible assets and goodwill, the gain or loss on disposal of businesses and the impact arising from the fair valuing of financial instruments. The narrative that follows is based on underlying operating profit, profit before tax and earnings per share, as the directors believe that these provide a more consistent measure of operating performance.
ii)	Excludes a special dividend of 50p per share paid in June 2007.
*	The weighted average number of shares used to calculate earnings per share was 177.2 million in 2008 and 185.9 million in 2007, following the 8 for 9 share consolidation on 11 June 2007.

For enquiries:	Laird PLC	Maitland
	Peter Hill, Chief Executive	Brian Hudspith
	Jonathan Silver, Finance Director	Suzanne Bartch
	Tel:  020 7468 4040	Tel: 020 7379 5151

OVERVIEW

Laird is a leader in the design and supply of customised, performance critical products and systems for wireless and other advanced electronic applications. We design, develop and supply the technology that allows people, organisations and electronic devices to connect effectively and efficiently, locally and globally: we provide technology for a connected world.

We are experiencing a time of sustained upheaval in the global economy, with its associated credit pressures and currency volatility, all of which are impacting our global electronics markets. We have repositioned our business to operate successfully in the changed economic and market environment, and have rapidly implemented an extensive programme of restructuring and cost reductions. We continue to invest in enhancing our technical and operational capabilities and increasing our customer penetration, while taking the necessary actions to maintain our competitive position.

The principal elements of our strategy remain in place, and we are confident of our ability to withstand the downturn and emerge as a stronger company, continuing to be essential to our customers needs.

RESULTS

We saw strong organic growth of 19% in the first half of the year, followed by some signs of softening in our markets during the third quarter. We then saw a sudden and dramatic reduction in our revenues during November, as the effects of the global macroeconomic downturn fully took hold in our markets and on our customers, accompanied by de-stocking in the global supply chain.

Revenue from continuing operations in 2008 was £635.3 million, up 13% (2007: £564.3 million). Organic revenue growth at constant currency for the year was 0.5%.

Underlying operating profit from continuing operations was £68.5 million in 2008, down 14% (2007: £80.0 million). Operating margin in 2008 was 10.8%, down from 14.2% in 2007, largely as a result of lower volumes in the second half.

Underlying profit before tax from continuing operations was £60.6 million in 2008, down 16% (2007: £72.4 million).

We have closed or downsized a number of facilities, and reduced overall headcount by some 5,000 between the beginning of October 2008 and January 2009. These actions resulted in exceptional costs from continuing operations of £20.3 million in the year (2007: £11.9 million from continuing operations), of which £3.4 million is non-cash. Annualised savings from these actions are estimated to be in excess of £15 million, with the majority of the benefits being seen in 2009, and the remainder in 2010.

Return on capital employed for the continuing business was 11.2% (2007: 16.0%), in excess of our cost of capital.

Statutory profit before tax from continuing operations in 2008, after exceptional items, the amortisation of acquired intangibles, the gain or loss on the disposal of businesses and the fair valuing of financial instruments, was £26.5 million (2007: £51.5 million).

Operating cash flow after capital expenditure from continuing operations in 2008 was £48.1 million, up 23% (2007: £39.2 million). Our increased focus on cash generation resulted in cash conversion before capital expenditure increasing to 112% in 2008 compared with 81% in 2007. After capital expenditure, cash conversion was 70% and 49% respectively.

We maintained our investment in plant and equipment, both to bring on stream our new facility in India and a second factory in Shenzhen, China, and in equipment both for customer awarded programmes and for new product development. Capital expenditure is expected to continue to be in excess of depreciation in 2009; we believe this will leave us well positioned for the future.

Net borrowings at 31 December 2008 were £139.5 million (2007: £85.4 million). Of this increase, £38.9 million resulted from the movement in exchange rates, mainly between the Pound Sterling and the US Dollar by year end, with much of the remainder due to maintaining our investment in the business.

Underlying earnings per share from continuing operations were 27.4 pence (2007: 33.1 pence), reflecting the lower profits and, as expected, a higher tax rate.

DIVIDEND

The Board's policy is to increase returns to shareholders progressively over time, reflecting both the underlying profitability and the cash requirements of the business. In line with this policy, and notwithstanding the challenging macroeconomic environment, the Board is recommending a maintained final dividend of 7.88 pence per share. This represents a total dividend for the year of 11.88 pence per share, an increase of 3% compared with the 11.5 pence per share for 2007. In addition, a special dividend of 50 pence per share was paid in June 2007.

STRATEGIC DEVELOPMENT

Laird specialises in providing products and solutions for our customers that allow their own electronic devices and systems to operate efficiently and cost effectively. Higher speed, power and performance of electronic devices, as well as the increasing trend to wireless connectivity, drive an increasing need for our products and solutions. We have created a unique portfolio of complementary products serving markets where we hold leading positions. This allows us to increase the content of our offering in individual electronic devices and places us in a unique position to combine technologies into a single product or assembly. We are:

The global leader in the suppression or prevention of electromagnetic interference ("EMI"), allowing devices to function effectively.

The global leader in mobile handset antennae, modules and sub-assemblies, improving signal transmission and reception.

A leader in actuation mechanisms, improving the physical operation and versatility of mobile handsets.

A leader in thermal management products, removing heat from electronic devices and allowing them to function efficiently.

A leader in infrastructure, satellite radio and other wireless antennae systems and modules optimising voice, visual and data transmission and storage.

In 2008 we reorganised our business into the following three divisions:

Handset Products, comprising our mobile antennae, handset board level EMI shielding, actuation mechanisms and associated handset components.

Performance Materials, comprising our non-handset EMI shields, signal integrity products and thermal management products.

Wireless Systems, comprising our infrastructure, telematics / satellite radio antennae, "machine to machine" wireless modules and other wireless antennae and systems.

Mobile phone handsets provide one of the world's largest concentrations of electronics equipment, and comprise our largest market segment. Our Handset Products division brings together all of our products and technologies for mobile phones and handheld communication devices. This allows us to achieve greater focus on this important market, additional customer penetration, and to provide a fully integrated service to those customers.

Our Performance Materials division brings together our products which protect electronic devices and ensure that they operate effectively and efficiently. Our product groups in this division generally share common customers, allowing increased penetration and better account management.

Our Wireless Systems division brings together all our non handset antennae and wireless module product areas, allowing improved technology synergies and more cost effective technology management.

HANDSET PRODUCTS DIVISION

Year ended 31 December	2008	2007
	£m	£m	+ / -
Revenue	348.7	303.0	+15%
Underlying operating profit	37.4	42.4	-12%
Return on sales	10.7%	14.0%

We are a leading global supplier of customised, high performance products to the global mobile phone handset and handheld device manufacturers, enhancing connectivity, performance and physical functionality. The division's products include cellular and complementary (Bluetooth, WiFi, FM, Zigbee and GPS) antennae, board level EMI shielding ("BLS"), environmental gaskets, mechanical actuation mechanisms such as sliders and camera shutters, audio modules, integrated sub-assemblies including SIM holders and contacts, and decorative metals.

Divisional revenues increased 15% in 2008 to £348.7 million, albeit this was enhanced by currency movements: organic revenue growth at constant currency for the division was 3% in the full year, a reduction from the 26% growth in the first half. The division accounted for 55% of Laird's total revenues in the year.

The majority, 57%, of divisional revenues in 2008 were cellular antennae products, with 24% from actuation mechanisms and 19% from handset metals, including BLS.

Our customers now include all the "top 5" global Original Equipment Manufacturers ("OEMs"): Nokia, Samsung, Motorola, Sony Ericsson and LG, as well as Asian Original Design Manufacturers ("ODMs") and OEMs such as Huawei and HTC, together with handheld device manufacturers such as RIM and Palm. We are expecting our first penetration on the third generation Apple iPhone in 2009.

Nokia, the world leader in mobile phones, is the largest customer for Laird and for the division. We supply our full range of products, including a high proportion of our antennae and BLS sales and virtually all of our actuation mechanisms sales. We enjoy high market shares across this product range, and saw good sales growth during 2008.

At Samsung, we saw our first significant shipments of BLS in 2008, and expect further penetration in 2009. We have recently achieved design wins for mechanisms, for shipment in 2009, and are working with Samsung on antennae development. At LG, we achieved a large percentage increase in our antennae sales as we gained share, albeit from a relatively low base. We expect to begin to supply BLS to LG in 2009.

Sales to Motorola of our antennae products, and particularly BLS, fell in the year, partly as a result of Motorola's own lower handset shipments in the year. We gained share in antennae, but accepted a reduced share in BLS particularly in lower priced shields. Sales to Sony Ericsson also fell, partly as a result of Sony Ericsson's own drop off in handset shipments, particularly in higher end handsets.

In 2008 we began to gain traction with Taiwanese handset OEMs and ODMs, as well as with the main handheld device makers RIM and Palm, with further gains expected in 2009.

Overall, the market for our mechanical actuation mechanisms continued to increase, with more phones using sliders and cameras. We now have a very significant business in this area, following our acquisition of M2Sys in early 2007, and in 2008 began to penetrate non-Nokia accounts. This trend is expected to continue in 2009.

The division's underlying operating profit fell 12% in the year to £37.4 million (2007: £42.4 million). Return on sales fell from 14.0% in 2007 to 10.7% in 2008 with the decline being caused by a number of factors. These included the effect of adverse foreign exchange movements in the first half of 2008, reduced volumes in the second half, change in the product mix (in particular a higher proportion of antennae modules and actuation mechanisms, with higher materials content, resulting in lower than average margins), increased investment in 2008 on engineering, R&D and account management, India start up costs, and increased price downs particularly in handset metals.

Most industry commentators expect global unit handset shipments to decline by at least 10% in 2009 compared with 2008. However, we believe that we can mitigate to a degree the impact of this on our business, by the broadening of our customer base and our expanded product portfolio, as well as through our continuous improvement programmes, higher procurement savings, and by concentrating our handset product manufacturing in our lowest cost plants, in China and India.

We announced the closure of our antennae assembly plant in Hungary in December, and began relocating manufacture of handset products from Mexico and the Czech Republic to China. Our plant in Chennai, India became fully operational during the year, initially supplying Nokia and with penetration of new customers in India anticipated in 2009. 2008 also saw us ramp up manufacturing and assembly of actuation mechanisms in Beijing and Shenzhen, China. During the year we expanded our handset engineering teams in Stockholm, Sweden and in Beijing and Shenzhen in China, and opened an advanced engineering and technology development centre in San Jose, USA, the latter achieving immediate programme wins for delivery in 2009.

We also made investments in the following key areas, which should benefit us in 2009 and beyond:-

Laser Directed Structuring ("LDS"), a method to apply three dimensional antennae patterns on a plastic carrier, using an advanced laser system and plating process.

Physical Vapour Deposition for the manufacture of precision visual parts.

State of the art processes for the manufacture of antennae radiators based on flexible circuit boards for the portable device market.

A unique combination of mechanical sliders containing an embedded, fully functional antennae system.

We are also expanding our product portfolio with advanced antennae solutions for the emerging mobile Broadband PC market. These will enable enhanced performance for 3G, 4G and advanced Radio Frequency ("RF") for Notebooks, Netbooks and mobile internet devices.

We believe that in the current period of market turmoil there are opportunities to increase our capabilities, bring on new product families, and expand our market shares at the expense of weaker competitors. We will be pursuing these opportunities in 2009, to best position our business for the market recovery.

PERFORMANCE MATERIALS DIVISION

Year ended 31 December	2008	2007
	£m	£m	+ / -
Revenue	190.9	181.8	+5%
Underlying operating profit	23.1	28.0	-17%
Return on sales	12.1%	15.4%

Our customised, high precision products and systems are critical in maintaining and enhancing the integrity and performance of electronic devices.

The division designs and supplies a full range of EMI shielding materials, thermal management solutions and signal integrity products. These provide critical protection for a wide range of electronic devices, allowing them to function and connect effectively, whether for voice or visual communication or for high quality data storage and transmission.

Our EMI shielding products isolate sensitive electronic components and apparatus from electromagnetic emissions, which can interfere with their operation and performance; our thermal management materials protect and improve a device's performance through the transfer of heat, while our ferrite-based signal integrity products remove and filter unwanted or harmful electromagnetic "noise" generated by active components.

Divisional revenues increased by 5% in 2008 to £190.9 million although at constant currency organic growth in the full year was negative 5%, compared with positive growth of 7% in the first half, as a result of the marked fall off in demand in the second half.

The majority, 65%, of the divisional revenues in 2008 were EMI shielding materials, with 23% from our thermal management solutions and 12% from our signal integrity products.

By market segment, the majority, 56%, of the division's revenues in 2008 were to the IT, telecommunications and Datacomm sectors, with the balance to the consumer electronics, industrial and instrumentation, medical, and aerospace and defence markets.

The division serves a large and diverse customer base and we remain particularly well positioned, with leading market shares, in the computing, network and telecom infrastructure segments. Despite the 2008 downturn, we saw increased sales over 2007 of our EMI and Thermal products to Cisco, Huawei, Motorola, Sun, Juniper, Quanta, Siemens, Ericsson, and Intel, and maintained our sales to Dell.

EMI and Thermal sales into the Notebook PC market showed good growth compared with 2007. Sales to HP declined, largely in our signal integrity products into the printer segment, where demand remained soft during the year. In consumer electronics, our EMI sales into the flat screen TV segment showed good growth in the year, again despite the downturn, with market share growth at Panasonic, Samsung, Toshiba and Sony.

Underlying operating profit fell 17% in the year to £23.1 million (2007: £28.0 million). Return on sales in the division fell from 15.4% in 2007 to 12.1% in 2008, with the decline due to a number of factors. These included the effect of adverse currency movements in the first half of 2008, reduced volumes in the second half, temporarily higher materials and sales administration costs resulting from our North American restructuring, increased investment in 2008 in engineering, R&D and account management, and pricing pressure in signal integrity products.

We were active in the year in expanding our product portfolio, and introduced new product lines in our non metal EMI shielding offering. These new products were key in strengthening our position in the telecom infrastructure segment, and we remain optimistic about their further potential.

We continue to expand our metal shielding solutions with our first sales to Garmin and Lorentz for their portable GPS applications. We have expanded our precision metals capabilities and we achieved our first convergence product sales using thermal board level shielding for Nokia and Micron.

Our range of thermal products are needed to remove unwanted heat from active electronic components, thereby enhancing their performance.

We maintained our leading market position in thermal gap filler materials, by expanding beyond traditional applications (computing, wireless infrastructure, and gaming), into new areas such as lighting and other consumer devices. New products were launched which focused on maintaining our lead in high thermal performance, and others were products designed to deliver acceptable performance at a lower price.

New high performance materials in phase change and grease products allowed us to achieve the extremely demanding performance required by customers for use in their memory and advanced micro processor applications. Thermal interface products for power and light applications also showed substantial growth, due to the emerging needs of high powered LED lighting applications.

Our thermoelectric heating and cooling products continued to grow as active cooling solutions for telecom infrastructure, medical imaging, lasers, and analytical systems demanded high reliability and precise temperature control in more compact thermoelectric systems.

In our signal integrity products, while our overall sales to the printer market were down, we successfully began diversifying our customer base beyond our traditional customer in this area, Hewlett Packard, with programme wins at Canon, Epson and Lexmark. We also began expanding our board level ferrite components offering, particularly for set top boxes and digital subscriber line hardware applications. We have begun developing a new generation of products, and are strengthening our direct sales force; both of these actions are expected to benefit us in 2009.

Operationally, we completed the closure of our EMI shielding plant in Pennsylvania, USA and have expanded the division's manufacturing footprint in Mexico and China. We have also announced the progressive ramp down of the majority of the manufacture of thermal products at our Cleveland, USA facility, and product transfers to China will take place during 2009.

The higher speed, power and performance of electronic devices will underpin demand for our Performance Materials division's products. In the current downturn we are accelerating the relocation of our remaining manufacturing in the USA to lower cost locations, maintaining our emphasis on the development of higher performance products to better differentiate us from our competitors, and expanding our customer base. All of these actions should benefit us when markets recover.

WIRELESS SYSTEMS DIVISION

Year ended 31 December	2008	2007
	£m	£m	+ / -
Revenue	95.7	79.5	+20%
Underlying operating profit	8.0	9.6	-17%
Return on sales	8.4%	12.1%

We design and supply a range of customised, high specification wireless antennae, systems and machine-to-machine ("M2M") wireless modules for the infrastructure, automotive and transportation, municipal, industrial and instrumentation, datacomm, security, retail and asset management markets.

Divisional revenues increased by 20% in 2008 to £95.7 million (2007: £79.5 million), helped by the acquisitions of Cushcraft in early 2007 and Ezurio in early 2008. Organic revenue growth at constant currency in the full year was 2%, compared with growth of 26% in the first half.

The majority, 57%, of the division's revenues in 2008 were from telematics antennae modules into the automotive market, with 34% of revenues from the infrastructure, datacomm, security and asset management sectors, and 9% from sales of our wireless M2M modules.

In 2008, our telematics antennae OEM sales to our major automotive customers were flat year on year, in spite of a rapidly deteriorating vehicle sales market in the second half of the year. These positive results were achieved in part by increasing the penetration of our antennae products as satellite radio became standard equipment on many vehicles in the United States. We also launched high volume antennae programmes with Ford, a new customer, during the year.

In the telematics commercial segment, we continued our planned ramp down in the low margin consumer retrofit segment and directed our focus on wireless M2M products. Our advanced development team introduced a low cost telematics device aimed at the asset management / vehicle tracking segment for the first time. In addition, we have developed several "smart antennae", meaning antennae integrated with wireless modules, for major customers such as Magneti Marelli and Qualcomm.

We are seeing increasing instances of applications where wireless modules, including 802.11, Wireless LAN, and Bluetooth, are integrated into telematics' products such as the smart antennae referred to above. Our new solution for vehicle tracking and data collection is also gaining traction with large fleet operators and is currently being evaluated in several field trials.

Our development of various Bluetooth, Zigbee and proprietary radio platforms will allow us to expand our product profile in various M2M segments beyond telematics, most notably in retail, meter reading and diagnostics applications.

Deployments of US based WiMax infrastructure networks were sluggish in 2008, due to delays in infrastructure roll outs as the market waited to see whether WiMax or the competing fourth generation cellular protocol would predominate. In infrastructure antennae more generally, we continued to win new OEM designs and are in a good position to participate in future growth areas such as Asia, where we have increased our sales footprint.

Although a number of large RFID deployments were delayed during the year, we saw our own business double in 2008 and continue to be optimistic regarding the long term growth opportunities offered by RFID penetration in asset tracking, real-time location systems (RTLS), and in retail and warehousing.

Our Land Mobile Radio applications grew well in 2008, driven by key OEM application wins as well as US Homeland Security spending. We believe there will be continued emphasis on US infrastructure spending in this area over the medium term.

We expanded our Broadband infrastructure capabilities through the use of cellular based frequencies, using picocells, point-to-point systems and repeaters. We have both strong OEM relationships as well as broad channel coverage, and are positioned to take advantage of the newly developed femtocell short range communications deployments in 2009 and beyond.

We also achieved growth in personal gaming and set top box applications. This market continues to look strong over the medium term as wireless networking solutions moves from accessories to standard integrated functionality for these devices.

The division's underlying operating profit fell 17% in the year, to £8.0 million (2007: £9.6 million). Return on sales fell from 12.1% in 2007 to 8.4% in 2008, with the decline being caused by a number of factors. These included the effect of lower volumes in the second half, higher materials content in M2M modules, increased investment in engineering, R&D and direct sales, and greater pricing pressure in Telematics.

The division suffered particularly in the latter part of 2008, with reduced demand in our telematics applications in line with the well publicised problems of the automotive industry. We also started to see delays and programme cutbacks in infrastructure and RFID antennae programmes, while the M2M module market did not exhibit the growth projected by industry commentators and customers in the first half of 2008.

We expect these conditions to continue during 2009. We will continue to reduce costs where necessary in the division to enhance our competitive position at the expense of weaker competitors. We are also maintaining our focus on product development and on improving our capabilities, as well as increasing our customer penetration and geographic spread of business beyond the US. All of these factors are designed to position the division for a return to growth as economic conditions recover.

OUTLOOK

In the first half of 2008 revenue and profits grew strongly. As the year progressed the extremely challenging economic environment affected all of our end-user markets and resulted in a marked fall off in demand for our products. While these macroeconomic conditions and de-stocking in the global supply chain have, as expected, continued into 2009, we have not seen any further deterioration in our revenues this year, although visibility remains limited. However, we still expect first half results to be considerably below the very strong levels seen in the first half of 2008.

We have a flexible business model with excellent customer relationships and a strong technology base. The long term fundamentals of our markets are attractive, our financial position is strong and we remain confident about our strategy. We have taken swift action to position the business to weather the downturn, and will continue to ensure that Laird maintains its competitive position and emerges from this economic cycle well placed to capitalise on the opportunities provided by the evolving communications environment.

FINANCE DIRECTOR'S REPORT 

Revision to Segments 

In 2008, Laird changed its organisational structure from two divisions, namely Antenna & Wireless Systems, and Electronic Components & Systems, to three divisions; Handset Products, Performance Materials and Wireless Systems. The segmental reporting adopted in these Accounts mirrors these changes.

Revenue 

Revenue from continuing operations increased by 13% to £635.3 million in 2008 (2007, £564.3 million). 

Organic growth from continuing operations is measured by restating 2008 revenue at 2007 exchange rates and comparing it to the reported revenue for 2007 but after adjusting 2007 on to a pro-forma basis. The pro-forma adjustment is the addition of revenue in respect of acquisitions as if we had owned the acquisitions in 2007 for the same proportion of the year that they were owned in 2008.

On this basis, organic growth was 3.1% for Handset Products (25.8% in the first half), a reduction of 4.8% for Performance Materials (growth of 7.3% in the first half) and growth of 2.2% for Wireless Systems (25.5% in the first half). Data for the full year are summarised in the table below: 

	Handset	Performance	Wireless
	Products	Materials	Systems	Total
	£m	£m	£m	£m
2007 revenue	303.0	181.8	79.5	564.3
Adjustment for acquisitions in 2007	4.7	-	6.7	11.4
2007 pro-forma revenue	307.7	181.8	86.2	575.7
2008 revenue	348.7	190.9	95.7	635.3
Adjustment to restate at constant exchange rates	(31.5)	(17.9)	(7.6)	(57.0)
2008 revenue at 2007 exchange rates	317.2	173.0	88.1	578.3
Organic growth	3.1%	(4.8)%	2.2%	0.5%

The top five customers accounted for 61% of revenue in 2008 (2007, 58%) and the top ten customers accounted for 67% (2007, 65%). 

Net Margins

Net margins were 10.8% in 2008 (2007, 14.2%). Margins by segment are summarised below. Margins were lower, year on year, in each segment with the impact of the slow down (including de-stocking) in the fourth quarter having a material impact. Data for the first half on the new segmental basis have also been included.

	First Half	Full Year	First half	Full Year
£m	2007	2007	2008	2008
Handset Products
Revenue	125.4	303.0	170.0	348.7
PBIT	16.5	42.4	19.3	37.4
ROS%	13.2%	14.0%	11.4%	10.7%
Performance Materials
Revenue	87.8	181.8	96.9	190.9
PBIT	13.7	28.0	13.7	23.1
ROS%	15.6%	15.4%	14.2%	12.1%
Wireless Systems
Revenue	33.5	79.5	48.1	95.7
PBIT	3.9	9.6	4.9	8.0
ROS%	11.6%	12.1%	10.2%	8.4%

Profit 

Profit before tax from continuing operations was £26.5 million (2007, £51.5 million). In the prior period, there was a profit after tax for the year from discontinued operations of £88.0 million which included a gain on sale of Laird Security Systems.

Underlying Profit

Continuing underlying profit before tax in the year was £60.6 million (2007, £72.4 million). Underlying profit is defined as profit before tax, exceptional items, amortisation of acquired intangible assets, the gain or loss on sale of businesses and the impact arising from the fair valuing of financial instruments, as set out in note 7. 

Exceptional Costs

The steps taken to reduce headcount and capacity as a result of the lower levels of activity have resulted in £20.3 million of exceptional costs in 2008 (2007, £11.9 million for continuing operations) of which £3.4 million is non-cash. Note 3 analyses these costs by division. The cash outlay in the period was £9.7 million (£4.2 million of which was accrued in 2007) with a further cash outlay to come in 2009 and 2010. Annualised savings are estimated at over £15 million.

Finance Costs 

Finance costs, excluding a loss on the fair valuing of financial instruments of £2.4 million (2007, gain of £1.2 million) were £7.9 million compared to £7.6 million in 2007. Interest cover was 8.2 times, well above the minimum of 2.5 required by the covenant in the Group's principal loan agreements. 

Taxation 

The underlying tax charge on total underlying profit before tax is equivalent to an average tax rate of 19.8%, higher than 15.5% in 2007, with the principal cause of the increase being a lower level of tax incentives in China. 

Profits in the USA are subject to a relatively low charge and should remain so for many years in part due to tax deductions for amortised goodwill resulting from acquisitions. A significant proportion of profits are also from jurisdictions with low tax rates or with tax incentives. An analysis of the total tax charge is given in note 4. Going forward, the average tax rate is likely to rise further given the increases in tax rates in China and this could mean an underlying rate of around 23% to 24% in 2009.

Underlying Earnings 

Continuing underlying earnings per share of 27.4p were 17% lower than the 33.1p achieved in 2007 (note 7). Underlying earnings are based on underlying profit less underlying tax and exclude deferred tax on acquired intangible assets and goodwill.

Cash Flow

Analysis of cash flow	2008
	£m
Operating profit	68.5
Depreciation / asset disposal gain	12.2
Other non-cash	(2.5)
	78.2
Increase in working capital*	(1.4)
Capital expenditure less disposals	(28.7)
Operating cash flow	48.1
Finance costs	(9.7)
Taxation	(17.2)
Trading cash flow surplus	21.2
Dividends	(21.1)
Acquisitions	(17.7)
Disposals	11.5
Exceptional costs	(9.7)
Additional pension contributions	(0.7)
Share issues	0.9
Other	0.4
Increase in net borrowings before exchange movement	(15.2)
Exchange translation movement	(38.9)
Increase in net borrowings	(54.1)

* after adjusting for creditor increases on exceptional items of £6.8 million.

There was a working capital increase of £1.4 million with both trade receivables and trade payables falling significantly (in constant currency) due to the lower levels of output in the fourth quarter but inventories were higher than at the end of 2007 and typically take longer to reduce following a drop in activity. Cash conversion (operating cash flow as a proportion of operating profit) was 70%. 

Treasury Policies

The Group has a centralised Treasury function whose objectives 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 a profit centre and operates within a framework of policies and procedures.

Group Treasury use 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

The Group is exposed to interest rate risk as it holds borrowings on both a fixed and floating basis. The Group's 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 the Group's finance costs.

Credit Risk

The Group's policy on counterparty risk management is to place cash deposits and other financial instruments with our relationship banks, all of whom also provide credit facilities to the Group. The level of exposure to each bank is continually monitored. As at 31 December 2008 all cash and short-term deposits had a maturity of less than one month.

Foreign Exchange Management

The Group aims to minimise its exposures to transactional currency exposures by matching local currency income with local currency costs. The Group aims to cover forward at least 75% of the unmatched cash flows on a quarterly basis.

Foreign currency borrowings are used to partially hedge the currencies of our principal assets and cash flows. Where foreign currency borrowings match with our investment in overseas assets they are treated as a hedge of the net investment.

Net Borrowings and Debt Facilities

Overall, net borrowings increased by £54.1 million to £139.5 million; £38.9 million of the increase reflects the weakness of sterling upon the translation of foreign currency borrowings (largely US Dollar denominated) as a result of the weaker Pound.

A cornerstone of Laird's financial planning is to ensure that the Group maintains committed loan finance which exceeds expected borrowing requirements and has a significant proportion with terms that exceed one year. Laird has £265 million (2007, £195 million) of bilateral revolving credit facilities which do not expire until August 2012, £70 million of which was arranged in 2008. In addition, Laird has in issue $150 million (£104 million) of US Dollar Private Placement notes which are repaid between 2010 to 2012 ($10 million), 2014 ($97 million) and 2016 ($43 million). In total, Laird has £369 million of committed loan finance, all in excess of 3 years.

Covenants

A key consideration for financial planning is to maintain sufficient headroom between borrowings and the ceiling set by the covenants. The Group's 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 2008, net borrowings were 1.8 times EBITDA, 52% of the maximum permitted of 3.5 times. Interest cover was 8.2 times, well in excess of the minimum requirement of 2.5 times. Thus, there was significant financial headroom. 

Going forward, as a matter of course we estimate our headroom against the covenants and in the current economic environment we have tested their sensitivity to a number of alternative scenarios to ensure ongoing compliance. We do not anticipate approaching our covenant limits.

Currencies in 2008 

The average and period end exchange rates are set out in note 2. In 2008, some 80% of revenues (and some 70% of costs) were in US Dollar and Renminbi with a further 12% in Euros. In 2008, we had a Renminbi deficit, but in 2009 and going forward, we expect the deficit to be eliminated as our customers plan to assemble more of their output in China, resulting in less of our product being exported to their plants outside of China. 

We strive to balance local currency exposures but we operate a global business and this can create some currency imbalances where we cannot always match operating or procurement costs with revenues in that currency. Other than the Renminbi, these currencies accounted for some 10% of our operating costs, largely represented by the Euro, Yen, Swedish Krona and Czech Koruna. In 2008, these currencies appreciated against the US Dollar (our effective operating currency in which we generate a large surplus) with most of the impact in the first half. For 2009, if current exchange rates were to prevail then this would be expected to have a beneficial impact compared with 2008.

In addition, there is a translation impact in converting profits into our reporting currency (the Pound); each US$0.01 appreciation against sterling approximates to an annual increase in operating profit of £400,000. 

The majority of the Group's assets are held overseas and these are hedged in part by foreign currency loans. The translation impact of exchange rate movements at the end of 2008 compared with the end of 2007 was substantial given the movement in exchange rates and increased shareholders' funds by £149.2 million.

Pensions 

Following the divestment of Laird Security Systems in 2007, there are only 14 employees who are members of the defined benefit plans.

IFRIC 14 was adopted in 2007, which allows pension surpluses to be taken onto the balance sheet dependent on the rules of individual schemes. There is an overall defined benefit pension scheme surplus of £0.1 million at 31 December 2008. At 31 December 2007, there was an overall surplus of £8.1 million.

The principal causes of the reduction in the surplus were changes in the assumptions used to calculate liabilities and lower asset values. The bond rate used to discount liabilities was 6.1% in 2008 compared to 5.7% in 2007 which together with a lower inflation rate assumption of 3.1% (2007, 3.4%), reduced the estimate for liabilities by £7 million. This was more than offset by a £14 million reduction in the value of the assets.

Shareholders' Funds 

Shareholders' funds at the 2008 year end were £585.3 million (2007, £448.5 million). The reconciliation is set out in note 11. 

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 11.2% compared to 16.0% in 2007.

Group income statement

for the year to 31 December 2008 

		2008	2007
		£m	£m
Note
	Continuing operations
1	Revenue	635.3	564.3
	Operating profit before amortisation of acquired intangible assets and exceptional items	68.5	80.0
	Amortisation of acquired intangible assets	(11.4)	(10.2)
3	Exceptional items	(20.3)	(10.4)
	Operating profit	36.8	59.4
	Finance revenue	0.5	2.8
	Finance costs	(9.6)	(11.2)
	Financial instruments - fair value adjustments	(2.4)	1.2
	Other net finance revenue - pension	1.2	0.8
	Exceptional finance costs	-	(1.5)
	Profit before  tax from continuing operations	26.5	51.5
4	Taxation	(12.2)	(11.8)
	Profit for the year from continuing operations	14.3	39.7
	Discontinued operations
5	Profit for the year from discontinued operations	-	88.0
	Profit for the year	14.3	127.7
6	Earnings per share
	Basic from continuing operations	8.1p	21.4p
	Diluted from continuing operations	8.0p	21.2p
	Basic on profit for the year	8.1p	68.7p
	Diluted on profit for the year	8.0p	68.0p

7	Underlying profit before tax*
	Continuing	60.6	72.4
	Total	60.6	76.8
	Underlying basic earnings per share*
	Continuing	27.4p	33.1p
	Total	27.4p	34.9p

8	Dividends declared / proposed
	Dividends	21.1	120.1
	Dividend per share	11.88p	61.5p

 

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

Statement of recognised income and expense

for the year to 31 December 2008

	2008	2007
	£m	£m
Profit for the year	14.3	127.7
Actuarial (losses) / gains on retirement benefit obligations	(9.7)	3.0
Deferred tax on actuarial gains / losses	1.7	(1.7)
Deferred tax on share based payments	(0.7)	-
Exchange differences on retranslation of overseas net investments	196.6	3.2
Exchange losses transferred to discontinued in income statement	-	19.5
Exchange differences on net investment hedges	(47.4)	1.7
Tax on exchange differences	-	0.7
Total income and expense recognised directly in equity	140.5	26.4
Total income and expense recognised for the year	154.8	154.1

Group balance sheet

as at 31 December 2008

		2008	2007
Note		£m	£m
	Assets
	Non-current assets
	Property, plant and equipment	123.7	76.1
	Intangible assets	610.0	451.0
	Deferred tax assets	2.7	1.4
9	Retirement benefit assets	4.0	12.3
	Other non-current assets	1.0	0.7
		741.4	541.5
	Current assets
	Derivative financial instruments	0.5	-
	Inventories	80.2	55.4
	Trade and other receivables	129.0	159.9
	Income tax receivable	2.9	2.0
10	Cash	46.9	32.8
		259.5	250.1
	Liabilities
	Current liabilities
	Borrowings	(7.6)	(9.4)
	Derivative financial instruments	(2.9)	-
	Trade and other payables	(115.1)	(132.8)
	Current tax liabilities	(6.8)	(9.1)
	Provisions	(7.0)	(7.1)
		(139.4)	(158.4)
	Net current assets	120.1	91.7
	Non-current liabilities
10	Borrowings	(178.8)	(108.8)
	Income tax payable	(28.9)	(22.0)
	Deferred tax liabilities	(57.8)	(43.9)
9	Retirement benefit obligations	(3.9)	(4.2)
	Other non-current liabilities	(2.8)	(2.1)
	Provisions	(4.0)	(3.7)
		(276.2)	(184.7)
	Net assets	585.3	448.5
	Capital and reserves
11	Equity share capital	49.9	49.8
11	Share premium	269.7	268.9
11	Retained earnings	113.4	128.4
11	Translation reserve	152.5	3.3
11	Treasury shares	(0.2)	(1.9)
	Total shareholders' equity	585.3	448.5

Group cash flow statement

for the year to 31 December 2008

		2008	2007
Note		£m	£m
12	Cash flows from operating activities
	Cash generated from operations	66.4	42.4
	Tax paid	(17.2)	(7.7)
	Net cash flows from operating activities	49.2	34.7
	Cash flow from investing activities
	Interest received	0.5	2.9
12	Acquisition of businesses (net of cash acquired)	(17.7)	(81.4)
	Purchase of property, plant and equipment	(30.0)	(27.9)
12	Inflow from sale of businesses	11.5	219.9
	Proceeds from sales of property, plant and equipment	1.3	0.5
	Net cash flows from investing activities	(34.4)	114.0
	Cash flows from financing activities
	Interest and other finance costs paid	(10.2)	(12.5)
	Net proceeds from issue of ordinary share capital	0.9	3.2
	Movement in treasury shares	0.4	-
	Increase / (decrease) in borrowings	16.8	(32.3)
	Dividends paid to shareholders	(21.1)	(120.0)
	Net cash flows from financing activities	(13.2)	(161.6)
	Effects of movements in foreign exchange rates	12.9	1.3
	Increase / (decrease) in cash and cash equivalents for the year	14.5	(11.6)
	Cash and cash equivalents at 1 January	32.4	44.0
	Cash and cash equivalents at 31 December	46.9	32.4

Notes to the financial statements

for the year ended 31 December 2008

1 Segmental analysis 

Following a reorganisation in the second half of 2008, the Group changed its primary reporting format to the three segments Handset Products, Performance Materials and Wireless Systems. These three segments were reported as the two segments Antenna & Wireless Systems and Electronic Components & Systems in the 2007 Report and Accounts. Comparative information for 2007 has been restated to reflect these segments.

Primary reporting format - business segments

	Handset		Performance		Wireless
	Products		Materials		Systems		Total
	2008	2007	2008	2007	2008	2007	2008	2007
	£m	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue from customers	348.7	303.0	190.9	181.8	95.7	79.5	635.3	564.3
Segment profit before:	37.4	42.4	23.1	28.0	8.0	9.6	68.5	80.0
Amortisation of acquired  intangible assets	(3.6)	(3.3)	(3.0)	(3.0)	(4.8)	(3.9)	(11.4)	(10.2)
Exceptional items	(3.3)	(0.8)	(13.8)	(8.9)	(3.2)	(0.7)	(20.3)	(10.4)
Operating profit	30.5	38.3	6.3	16.1	-	5.0	36.8	59.4
Finance revenue							0.5	2.8
Finance costs							(9.6)	(11.2)
Financial instruments - fair value adjustments							(2.4)	1.2
Other net finance revenue - pension							1.2	0.8
Exceptional finance costs							-	(1.5)
Profit before tax							26.5	51.5
Taxation							(12.2)	(11.8)
Profit for the year from continuing operations							14.3	39.7
					Laird Security Systems		Total
					2008	2007	2008	2007
					£m	£m	£m	£m
Discontinued operations
Revenue					-	72.9	-	72.9
Segment profit before:					-	4.4	-	4.4
Amortisation of acquired intangible assets					-	(0.3)	-	(0.3)
Exceptional items					-	(0.6)	-	(0.6)
Operating profit					-	3.5	-	3.5
Taxation					-	(1.1)	-	(1.1)
Profit after tax from discontinued operations					-	2.4	-	2.4
Profit before tax on current year disposal					-	89.3	-	89.3
Loss before tax on prior year disposal*							-	(4.0)
Taxation *							-	0.3
Profit from discontinued operations							-	88.0
Profit for the year							14.3	127.7

* These relate to other business segments disposed of in years prior to 2007.

1 Segmental analysis (continued)

	Handset		Performance		Wireless		Laird Security
	Products		Materials		Systems		Systems		Total
	2008	2007	2008	2007	2008	2007	2008	2007	2008	2007
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Segment assets	334.0	281.8	419.9	316.2	230.2	161.9	-	-	984.1	759.9
Unallocated assets	-	-	-	-	-	-	-	-	16.8	31.7
Total assets	334.0	281.8	419.9	316.2	230.2	161.9	-	-	1,000.9	791.6
Segment liabilities	51.3	68.9	44.0	38.0	16.2	18.9	-	-	111.5	125.8
Unallocated liabilities
- borrowings	-	-	-	-	-	-	-	-	186.4	118.2
- other	-	-	-	-	-	-	-	-	117.7	99.1
Total liabilities	51.3	68.9	44.0	38.0	16.2	18.9	-	-	415.6	343.1
Other segment items
Capital additions	18.1	15.7	15.2	11.1	3.8	3.4	-	2.0	37.1	32.2
Acquisition of businesses	-	18.2	-	-	13.0	72.6	-	-	13.0	90.8
Total additions	18.1	33.9	15.2	11.1	16.8	76.0	-	2.0	50.1	123.0
Depreciation	5.9	4.1	4.9	4.7	1.6	1.2	-	1.7	12.4	11.7
Amortisation of intangible assets	5.3	4.7	3.6	3.4	5.6	4.1	-	0.3	14.5	12.5

1 Segmental analysis (continued)

The segment revenue analysis in the table below is based on the location of the customer. Segment assets and additions during the year are based on location of production.

	Segment revenue		Segment assets		Asset additions
	2008	2007	2008	2007	2008	2007
	£m	£m	£m	£m	£m	£m
Continuing operations
North America	129.0	126.9	581.2	429.2	8.1	79.4
Europe	101.4	102.0	148.1	125.4	20.0	4.4
Asia	387.8	324.9	254.8	205.3	22.0	37.2
Rest of World	17.1	10.5	-	-	-	-
	635.3	564.3	984.1	759.9	50.1	121.0
Discontinued operations
North America	-	28.8	-	-	-	1.0
Europe	-	42.2	-	-	-	1.0
Asia	-	1.4	-	-	-	-
Rest of World	-	0.5	-	-	-	-
	-	72.9	-	-	-	2.0
Total continuing and discontinued	635.3	637.2	984.1	759.9	50.1	123.0
Unallocated	-	-	16.8	31.7	-	-
	635.3	637.2	1,000.9	791.6	50.1	123.0

2 Exchange rates  

The results and cash flows of overseas subsidiaries are translated into sterling using weighted average rates of exchange for the year. The principal rates used were as follows:

	Average		Closing
	2008	2007	2008	2007
Czech Koruna	31.47	40.60	27.77	36.20
Euros	1.26	1.46	1.03	1.36
Japanese Yen	192.62	235.64	130.33	222.38
Renminbi (RMB)	12.91	15.22	9.81	14.54
Swedish Krona	12.09	13.51	11.37	12.87
US dollars	1.86	2.00	1.44	1.99

3 Exceptional items

	2008	2007
	£m	£m
Continuing operations:
Handset Products
Fixed assets write downs	(0.3)	(0.2)
Inventory write downs	(0.1)	-
Other restructuring costs	(2.9)	(0.6)
	(3.3)	(0.8)
Performance Materials
Fixed assets write downs	(1.5)	(2.9)
Inventory write downs	(1.4)	(0.2)
Other restructuring costs	(10.9)	(5.8)
	(13.8)	(8.9)
Wireless Systems
Inventory write downs	(0.1)	-
Other restructuring costs	(3.1)	(0.1)
Acquisition related payments	-	(0.6)
	(3.2)	(0.7)
	(20.3)	(10.4)
Finance costs incurred on the early repayment of Private Placement notes	-	(1.5)
Discontinued operations:
Laird Security Systems
Other restructuring costs	-	(0.6)
	(20.3)	(12.5)

Note

(a)	The total cash outlay for exceptional costs in 2008 was £9.7m (2007, £4.6m).
(b)	The tax effect on exceptional items in 2008 is a £2.2m tax credit (2007, £1.6m tax credit).
(c)	Other restructuring costs include redundancy and site closure costs.

4 Taxation

	2008	2007
	£m	£m
The tax charge in the income statement is disclosed as follows:
Tax charge on continuing operations	12.2	11.8
Tax charge on discontinued operations	-	0.8
	12.2	12.6

 Reconciliation of the total tax charge for the year

The tax charge in the income statement for the year is lower than the standard rate of corporation tax in  the UK of 28% (2007, 30%). The difference is reconciled below:

	2008	2007
	£m	£m
Profit before tax from continuing operations	26.5	51.5
Profit before tax from discontinued operations	-	88.8
Total profit before tax	26.5	140.3
Profit before tax multiplied by the standard  rate of corporation tax in the UK of 28% (2007, 30%)	7.4	42.1
Effects of:
Expenses not deductible for tax purposes	6.5	7.4
Non taxable profit on disposal	-	(25.6)
Regional tax incentives	(5.4)	(12.4)
Overseas tax rate differences	-	2.6
Prior year items	(4.2)	(4.4)
Unrelieved tax losses	7.9	2.9
Total tax expense reported in the income statement	12.2	12.6

5  Discontinued operations

	2008	2007
	£m	£m
Results from discontinued operations:
Revenue	-	72.9
Operating profit before:	-	4.4
Amortisation of acquired intangible assets	-	(0.3)
Exceptional items	-	(0.6)
Taxation	-	(1.1)
Profit after tax from discontinued operations	-	2.4
Profit on disposal of businesses:
Profit before transfer from translation reserve	-	108.8
Transfer from translation reserve	-	(19.5)
Profit on current year disposals	-	89.3
Loss on prior year disposals	-	(4.0)
Taxation	-	0.3
Profit after tax on disposals	-	85.6
Profit from discontinued operations	-	88.0

 The results from discontinued operations in 2007 are the results from Laird Security Systems, which was  disposed of on 27 April 2007 for a total consideration of £242.5m.

6 Earnings per share

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 profits 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.

	2008	2007
	£m	£m
Profit
Profit after tax from continuing operations	14.3	39.7
Profit from discontinued operations	-	88.0
Profit for the year	14.3	127.7
	Number	Number
	of shares	of shares
	(m)	(m)
Weighted average shares
Basic weighted average shares	177.2	185.9
Options	1.0	1.8
Diluted weighted average shares *	178.2	187.7
Earnings per share	Pence	Pence
Basic from continuing operations	8.1	21.4
Diluted from continuing operations	8.0	21.2
Basic from discontinued operations	-	47.3
Diluted from discontinued operations	-	46.8
Basic on profit for the year	8.1	68.7
Diluted on profit for the year	8.0	68.0

* Any anti-dilutive shares would be unlikely to impact earnings per share in the future.

7 Underlying results

Underlying profit and earnings per share are shown as the Board considers them to be relevant guides to the performance of the Group. The tax charge for the year is equivalent to 19.8% (2007, 15.5%) of underlying profit before tax.

	2008	2007
	£m	£m
Profit
Continuing profit before amortisation of acquired intangible assets and exceptional items	68.5	80.0
Finance revenue	0.5	2.8
Finance costs	(9.6)	(11.2)
Other finance revenue - pension	1.2	0.8
Continuing underlying profit before tax	60.6	72.4
Discontinued operating profit before amortisation of acquired intangible assets and exceptional items	-	4.4
Total underlying profit before tax	60.6	76.8
Tax
The underlying tax charge is calculated as follows:
Underlying tax on continuing operations	12.0	10.8
Underlying tax on discontinued operations	-	1.1
Total underlying tax	12.0	11.9
Continuing underlying tax rate	19.8%	14.9%
Total underlying tax rate	19.8%	15.5%
Tax relief on exceptional items	(2.2)	(1.6)
Deferred tax on goodwill and acquired intangible assets	2.4	2.2
Tax on prior period discontinued operations	-	(0.3)
Tax on fair value movement of financial instruments	-	0.4
Total tax charge	12.2	12.6
Analysis of tax charge:
Tax on profit from continuing operations	12.2	11.8
Tax on discontinued operations	-	0.8
Total tax charge	12.2	12.6
Earnings per share	Pence	Pence
Continuing underlying earnings per share - basic	27.4	33.1
Continuing underlying earnings per share - diluted	27.3	32.8
Total underlying earnings per share - basic	27.4	34.9
Total underlying earnings per share - diluted	27.3	34.6

8 Dividends paid and proposed

On 10 March 2009 the Board declared, subject to approval from shareholders, a final dividend of 7.88p per share (2007, 7.88p). The final dividend will be paid on 6 July 2009 to shareholders registered on 5 June 2009. 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.

	Dividends paid		Dividends declared /
			proposed*
Total Dividends	2008	2007	2008	2007
	£m	£m	£m	£m
Final 2006	-	13.9	-	-
Special 2007	-	99.7	-	99.7
Interim 2007	-	6.4	-	6.4
Final 2007	14.0	-	-	14.0
Interim 2008	7.1	-	7.1	-
Final 2008	-	-	14.0	-
	21.1	120.0	21.1	120.1

Dividends per share	Dividends paid		Dividends declared /
			proposed*
	2008	2007	2008	2007
	Pence	Pence	Pence	Pence
Final 2006	-	6.95	-	-
Special 2007	-	50.00	-	50.00
Interim 2007	-	3.62	-	3.62
Final 2007	7.88	-	-	7.88
Interim 2008	4.00	-	4.00	-
Final 2008	-	-	7.88	-
	11.88	60.57	11.88	61.50

* attributable to the period

9 Retirement benefit obligations

14 employees (2007, 15) are members of two different defined benefit schemes and these schemes have approximately 1,700 (2007, 2,100) deferred and current pensioners. The employer contributions made to these schemes during the year were £1.0m (2007, £14.1m). 

The market value of the schemes' assets, the present value of the schemes' liabilities and the net pension assets and liability under IAS 19 at 31 December were as follows:

	Schemes			Schemes
	in			in surplus
	surplus			with a
	with a			right to	Other
	right to a	Other	Total	a refund	Schemes	Total
	refund	schemes
	2008	2008	2008	2007	2007	2007
	£m	£m	£m	£m	£m	£m
Annuities	8.4	-	8.4	3.9	4.9	8.8
Equities	29.3	-	29.3	32.9	8.3	41.2
Gilts and bonds	42.0	-	42.0	31.0	9.8	40.8
Other including cash	4.6	-	4.6	7.0	0.1	7.1
Total market value of assets	84.3	-	84.3	74.8	23.1	97.9
Present value of scheme liabilities	(78.1)	(3.9)	(82.0)	(62.3)	(26.6)	(88.9)
Funded status	6.2	(3.9)	2.3	12.5	(3.5)	9.0
Disallowed assets	(2.2)	-	(2.2)	(0.2)	(0.7)	(0.9)
Surplus / (deficit) in the schemes	4.0	(3.9)	0.1	12.3	(4.2)	8.1

10 Analysis of movements in net borrowings

	At 1					At 31
	January	Cash	Acquisitions	Non-cash	Exchange	December
Year to 31 December 2008	2008	flow	and disposals	changes	differences	2008
	£m	£m	£m	£m	£m	£m
Cash at bank	32.8	1.2	-	-	12.9	46.9
Overdrafts	(0.4)	0.4	-	-	-	-
Loans due within one year	(9.0)	(2.2)	-	(4.9)	8.5	(7.6)
Loans due after more than one year	(108.8)	(14.6)	-	4.9	(60.3)	(178.8)
Total	(85.4)	(15.2)	-	-	(38.9)	(139.5)

	At 1					At 31
	January	Cash		Non-cash	Exchange	December
Year to 31 December 2007	2007	flow	Acquisitions	changes	differences	2007
	£m	£m	£m	£m	£m	£m
Cash at bank	44.0	(12.5)	-	-	1.3	32.8
Overdrafts	-	(0.4)	-	-	-	(0.4)
Loans due within one year	(4.7)	3.7	0.6	(8.7)	0.1	(9.0)
Loans due after more than one year	(148.1)	28.5	-	8.7	2.1	(108.8)
Finance leases	(0.3)	0.1	0.2	-	-	-
Total	(109.1)	19.4	0.8	-	3.5	(85.4)

11 Reconciliation of movements in equity

	Ordinary
	share	Share	Retained	Translation	Treasury
	capital	premium	earnings	reserve	shares	Total
	£m	£m	£m	£m	£m	£m
At 1 January 2007	49.5	266.0	155.4	(59.0)	(2.7)	409.2
Total recognised income and expense for the year	-	-	129.7	24.4	-	154.1
Transfer between reserves	-	-	(37.9)	37.9	-	-
Exercise of share options	0.3	2.9	-	-	-	3.2
Share based payments	-	-	2.0	-	-	2.0
Vesting of LTIPs	-	-	(0.8)	-	0.8	-
Dividends paid	-	-	(120.0)	-	-	(120.0)
At 1 January 2008	49.8	268.9	128.4	3.3	(1.9)	448.5
Total recognised income and expense for the year	-	-	5.6	149.2	-	154.8
Exercise of share options	0.1	0.8	-	-	-	0.9
Share based payments	-	-	1.8	-	-	1.8
Treasury shares	-	-	-	-	0.4	0.4
Vesting of LTIPs	-	-	(1.3)	-	1.3	-
Dividends paid	-	-	(21.1)	-	-	(21.1)
At 31 December 2008	49.9	269.7	113.4	152.5	(0.2)	585.3

12 Additional cash flow information

Cash generation from operations

Continuing operations	2008	2007
	£m	£m
Net profit after taxation	14.3	39.7
Depreciation and other non-cash items
Depreciation	12.4	10.3
Amortisation of capitalised development costs	3.1	2.0
Exceptional fixed asset write downs	1.8	3.1
Exceptional inventory write downs	1.6	0.2
Profit / (loss) on disposal of fixed assets	(0.2)	0.1
Capitalised development costs	(7.3)	(3.8)
Share based payments	1.8	1.8
Amortisation of acquired intangible assets	11.4	10.2
Financial instruments - fair value adjustments	2.4	(1.2)
Pension charges	0.6	0.2
Other net finance costs	7.9	9.1
Taxation	12.2	11.8
Pension contributions	(1.0)	(14.1)
Changes in working capital
Inventories	(5.2)	(19.8)
Trade and other receivables	56.3	(41.5)
Trade, other payables and provisions	(45.7)	39.5
	5.4	(21.8)
Cash generated from continuing operations	66.4	47.6
Discontinued operations
Net profit after taxation	-	88.0
Profit on disposal of businesses before taxation	-	(85.3)
Depreciation and other non-cash items
Depreciation	-	1.7
Amortisation of acquired intangible assets	-	0.3
Taxation	-	0.8
Changes in working capital	-	(10.7)
Cash flow from discontinued operations	-	(5.2)
Cash generated from operations	66.4	42.4

Notes

(a)	Working capital movements from continuing operations are after creditor increases of £6.8m (2007, £3.9m increases) in respect of exceptional costs of redundancy and restructuring.

12 Additional cash flow information (continued)

Net cash outflow on acquisitions and disposals

	2008	2007
	£m	£m
Acquisition of businesses
Consideration:
Cash consideration	(13.5)	(80.6)
Net cash acquired	0.3	1.6
	(13.2)	(79.0)
Deferred consideration paid	(4.5)	(2.4)
Net cash outflow on acquisition of businesses	(17.7)	(81.4)
Disposal of businesses
Consideration:
Net cash consideration
Current year disposals	-	219.4
Prior year disposals	11.5	(0.2)
Net cash consideration	11.5	219.2
Cash disposed of	-	(0.1)
Borrowings disposed of	-	0.8
Net cash inflow on disposal of businesses	11.5	219.9

 The total disposal consideration and major classes of assets and liabilities sold during 2008, stated at average exchange rates, is as follows:

	2008	2007
	£m	£m
Assets and liabilities disposed of other than cash
Property, plant and equipment	-	27.3
Intangible assets (including goodwill)	-	56.2
Inventories	-	39.3
Receivables	-	39.2
Payables	-	(38.6)
Borrowings	-	(0.8)
	-	122.6
Cash and cash equivalents relating to the disposal in 2007:
Cash consideration (after transaction costs)	12.3	219.4
Cash disposed of	-	(0.1)
Net cash inflow from disposal during the year	12.3	219.3

Gross consideration for the disposal in 2007 was £242.5m of which £12.5m was deferred for one year.

13 Other information

The financial information for the year ended 31 December 2008 set out above has been extracted from the 2008 Annual Report and Accounts which have been audited by Ernst & Young LLP who have given an unqualified audit opinion. The Accounts for 2008 are expected to be filed following the Company's Annual General Meeting to be held on 8 May 2009. The Company's 2008 Annual Report and Accounts, including the Notice of Annual General Meeting, will be posted to shareholders.

The proposed final dividend will be paid on 6 July 2009 to shareholders registered on 5 June 2009.

ENDFR CKKKDBBKBQND

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Laird