3rd Jun 2008 07:00
Sepura plc
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 2008
Cambridge, England: 3 June 2008. Sepura plc ("the Company"), a leading global provider of TETRA digital radios, today announces its preliminary results for the financial year ended 31 March 2008.
An analyst presentation of the preliminary results will be held today at 9.00 am at the offices of Goldman Sachs, Room 2D, Brook House, 120 Fleet Street, London EC4A 2BB.
|
Summary Financial Information |
2008 £'000 |
2007 £'000 |
Change |
|
International revenue |
41,266 |
24,543 |
+ 68% |
|
UK revenue |
26,839 |
27,444 |
- 2% |
|
Total revenue |
68,105 |
51,987 |
+ 31% |
|
Operating profit (excluding IPO costs) |
14,674 |
9,183 |
+ 60% |
|
IPO costs |
(2,141) |
(1,606) |
|
|
Operating profit |
12,533 |
7,577 |
+ 65% |
|
EBITDA (excluding IPO costs) |
20,571 |
13,631 |
+ 51% |
|
Diluted EPS (excluding IPO costs) |
7.9p |
5.6p |
+ 41% |
Financial Highlights:
Operating Highlights:
Strategic Highlights:
¹ Pre-IPO costs of £2.1m (2007: £1.6m)
² Based on information contained in IMS report: "The Worldwide Market for Licensed Mobile Radio" - December 2007
Philip Nolan, Chairman of Sepura, commented:
"In a year where the growth of the TETRA market has been below industry forecasts, Sepura has grown its market share and delivered significant growth in both sales and profitability. The major highlight is the growth in international sales and market share - both of which exceeded our expectations.
The outlook for the business continues to be positive. Markets are primed to grow significantly and Sepura is well positioned to capitalise on these opportunities. We expect continued growth in the coming year but weighted to the second half."
FOR FURTHER INFORMATION PLEASE CONTACT:
Sepura Tel: 01223 876 000
Graham Mathews, Chief Executive
Steve Crowther, Chief Financial Officer
Powerscourt (Media Enquiries) Tel: 020 7250 1446
Keith Brookbank
Victoria Palmer-Moore
Cautionary Statement
This Preliminary Statement contains certain forward-looking statements with respect to the operations, performance and financial condition of Sepura. By their nature, future events and circumstances can cause results and developments to differ from those anticipated. Nothing in this Preliminary Statement should be construed as a profit forecast. No undertaking is given to update the forward-looking statements whether as a result of new information, future events or otherwise.
NOTES TO EDITORS:
About Sepura
Sepura is a global leader in the design, manufacture and supply of TETRA (TErrestrial Trunked RAdio) digital mobile radios, used predominantly by the emergency services around the world as well as in the military, transportation, utilities, local government and commercial sectors.
The TETRA standard was developed mainly for public safety professionals. It facilitates reliable radio communication at all times and offers secure voice and data transmissions - free from the possibility of eavesdropping.
Sepura has rapidly expanded across the world with a network of more than 75 regional partners that sell and support locally its market-leading products in over 90 countries. It is now the market leader in more than 25 countries.
Sepura's development expertise is focused entirely on TETRA radio terminals, and the Company offers the broadest range of TETRA products available. It is the market leader in the supply of surveillance and other specialist TETRA radios and accessories.
Based in Cambridge, England employing some 300 employees, Sepura was admitted to the Official List of the London Stock Exchange on 3 August 2007.
For further information please visit www.sepura.com
Recognition For Innovation
The Company has won a number of awards in recent months, including the PLC Award 2007 for Best Technology Company and the 2008 Frost & Sullivan Global First Responder Company of the Year Award.
INTRODUCTION
Whilst it was disappointing that our results for the year ended 31 March 2008 were lower than original expectations, it is clear that they still represent a strong performance and demonstrate the significant progress we have made during the past 12 months. In a year where the growth of the TETRA market was below expectations, we have compensated by increasing market share, leading to increased sales and profitability. The results confirm that the Company is well positioned for the decade of growth we see in the TETRA market.
This year, Sepura grew revenue by 31%, operating profit (excluding IPO costs) was up 60% and diluted earnings per share (excluding IPO costs) increased by 41%.
International sales grew 68% evidencing both the growth potential of the market and Sepura's ability to capture market share. We estimate that Sepura's market share of total shipments grew from 19% in calendar year 2006 to 31% in calendar year 2007, making us the number two global supplier of TETRA radios.
In the UK our results were adversely impacted by the slippage of two orders in the final quarter of the year which pushed some revenue and consequential operating profit into the next financial year. Aside from this delay, our UK business delivered to plan. The UK police replacement cycle is well underway, with police forces beginning to replace earlier generation TETRA radios they procured when the Airwave network was first rolled out.
We continue to view the outlook for the TETRA market positively with the market fundamentals providing a foundation for continued strong growth. We estimate that there are about 20 million licensed private mobile radios in use around the world outside North America with digital radios likely representing some 10% of the total. Within this digital base, TETRA is the dominant standard now being present in over 100 countries. We expect most of the analogue base to migrate to TETRA over the coming years. During the next twelve months we expect police customers in Germany to begin placing orders for terminals, as the network is already being deployed. Deliveries in Italy have already started. These two countries represent the largest markets in Europe, each being significantly larger than the UK market.
BUSINESS REVIEW
RESULTS OVERVIEW
FY08 showed year-on-year revenue growth up 31% to £68.1m with units shipped up 49% to 118,000. Operating profit (excluding IPO costs) increased 60% to £14.7m and we achieved our target gross margin of 53%. Diluted EPS (excluding IPO costs) grew 41% to 7.9p. Cash inflow (excluding IPO costs) was £9.5m, with closing cash of £15.6m. Outstanding debt was £13.3m. As indicated at listing, we continued our focused investment in product research and development and in growing our sales and marketing reach.
Growth in international revenue, up 68% on FY07, was in part a result of this increased investment. International revenue accounted for 61% of total revenue in the year and we expect international sales to increase progressively as a proportion of our total sales. The UK is now a relatively mature market, but with a large installed base it will continue to generate significant revenues for Sepura going forward. In particular, the UK replacement cycle is on track and we have already been awarded orders for replacement radio fleets from a number of our existing UK police force customers.
MARKET OVERVIEW
In their December 2007 report IMS* estimated that global shipments of TETRA radios in 2007 increased by around 11% on the previous year. This was less that their original forecast of 56%. However, they predict resumption of strong growth in 2008 with 64% year-on-year growth, followed by an average annual growth rate of 32% between 2009 and 2011. This would suggest annual shipments by 2011 of approximately 1.5 million units. Predicting the precise timing of market growth is difficult given the inherent lumpiness of the TETRA market. Whilst we remain optimistic on short term growth trends we would take a more cautious view than IMS. They attribute the low relative growth in 2007 and the predicted higher growth going forward to "first generation" networks having been completed and now a "second wave" of networks being deployed. This second wave includes national public safety networks in countries such as Germany, Italy, South Korea, China, Russia and Mexico. Among the first generation networks, there is also increasing momentum in the replacement market including the UK and the Netherlands.
Based on the IMS* numbers, we believe Sepura was the second largest supplier of TETRA radios worldwide in calendar year 2007, and the largest supplier to public safety users. We estimate our share of these shipments to have been 31% and 48% respectively.
Capturing market share in new markets is very important to the Company's long-term success. TETRA users consistently stay with their initial supplier because of economies of scale, the embedded nature of the equipment and the high costs and operational difficulties of supplier change. These customers deliver significant repeat revenue over the long term as they replace radios and accessories several times during the lifespan of networks. In FY08 43% of our revenue came from existing customers.
We are confident that our proven track record, market-leading product range and extensive routes to market position us well to win significant market share in new and existing markets.
* IMS report: "The Worldwide Market for Licensed Mobile Radio" published December 2007.
SEPURA HIGHLIGHTS
Major Contract Wins
International
UK
Product Portfolio
Since the year-end, in May 2008, we formally launched the new STP8000 range of hand-held radios, an important addition to our existing product range. Now in full production, these products are the culmination of two years of intense effort by our engineering team. Over the last three months we have demonstrated and trialled this new range with more than forty customers around the world and we are encouraged by the positive response. We are confident that the STP8000 will further strengthen our competitive advantage and ability to win new business.
In addition, and during the year, we added other new products and features to our product portfolio. These included the wideband hand-held and vehicle radios which can transmit and receive communications across wider radio frequency ranges, enabling their operation in new radio frequencies now available for TETRA.
International Sales Channels
During the year, we added 11 new partners to our international distribution network, bringing the total number to 77; our network now covers all major TETRA markets.
We are also looking to add further distribution partners who will give us access to vertical markets, in addition to public safety, including transport, which is the second largest market for TETRA and a key target for Sepura.
We manage our distribution network tightly, providing extensive and ongoing pre-sales education and training to our distribution partners, and then working closely with them and our customers in providing local after-sales support.
Product Costs
Substantial progress has been achieved in establishing lower-cost manufacturing. In China, Tianjin Communications & Broadcasting Company ("TCB") is now manufacturing our products and targeting these at the Chinese and certain other markets. We have also transferred a small component of our Siemens manufactured product from the current Vienna base to a lower cost Siemens facility in Eastern Europe.
Investing for the Future
We recognise that our market is still in its very early stages, and as such we need to continue to invest in developing our organisation and its capabilities in order to meet the demands of a growing market. During the year, we continued our focussed investment in R&D and sales and marketing resource. Our R&D spend of £13.8m increased by 12% but declined to 20% of revenue versus the previous year's 24%. Selling and marketing spend of £8.8m was up 22%, but declined to 13% of revenue from 14% in the prior year. Administration expenses (excluding IPO costs) increased 14% to £4.7m, representing 7% of revenue, compared to £4.1m and 8% of revenue in the previous year.
Existing Customers and Markets
Sepura has to date supplied more than 800 end-user organisations around the world, and 43% of our revenue in FY08 came from our existing customer base. This percentage is expected to increase as our installed base grows and will continue to be a significant revenue contributor in future years. We have maintained our strong record of customer retention by providing a comprehensive product range, the timely delivery of new products and features and our dedication to first-class customer service.
OUTLOOK
We anticipate a significant acceleration in the adoption, planning and deployment of TETRA networks across multiple geographies and sectors. National public safety deployments are highly visible, but in addition there are significant numbers of smaller networks being installed around the world. This will drive increased demand for our products over the next five years.
We expect shipments to the UK market to grow in FY09 as rollouts on surveillance and UK ambulances complete and as the replacement cycle commences. Thereafter, we expect shipments to flatten out as the market becomes characterised by the ongoing replacement of the installed base.
With 100 countries now having established TETRA networks, we expect major growth in the international market. Germany and Italy are expected to take their first major deliveries in FY09 and our shipments to these countries are expected to account for approximately 10% of Sepura's volumes in that year.
We are cautiously optimistic that for the first time TETRA may be allowed into North America, as a result of user interest leading to a relaxation of licensing restrictions by essential IPR holders.
Our product range has never been stronger or more competitive. We have recently launched the STP8000 hand-held radio range to spearhead our drive for continued market share growth in international markets, and the positive reaction it has received so far is very encouraging.
We therefore expect to achieve strong year-on-year revenue growth again in FY09, notwithstanding the inherent lumpiness in the TETRA business and the fact that the year will have a second-half weighting. We remain very confident in the Group's long-term opportunities and prospects.
FINANCIAL REVIEW
REVENUE
Revenue increased 31% to £68.1m (2007: £52.0m). This growth has been driven by the rapidly expanding international market where TETRA networks are gaining ground in the switch to digital infrastructure. International revenues increased 68% to £41.3m (2007: £24.5milion), representing 61% of total sales (2007: 47%). The majority of international sales are denominated in Euros, and the strength of the Euro contributed approximately 8% of the increase in international revenues.
UK revenues were flat at £26.8m (2007: £27.4m), reflecting the maturing of the market following the successful implementation of the Airwave TETRA deployment.
During the year, we delivered 118,000 (2007: 79,000) units, an increase of 49% compared with the previous year, with international deliveries up 78% to 89,000 units and UK deliveries stable at 29,000 units. The ARPUS (Average Revenue Per Unit Shipped) reduced from £659 to £579, mainly reflecting the change in sales mix to increased international sales. Underlying radio prices fell on average by 7.5%, offset by increased accessory sales, which are becoming an increasingly important component of our business as our installed base grows.
Our revenues will always include large government contracts and, as such, are prone to lumpiness. However, the growth in our overall sales will reduce our reliance on any one customer and, as we continue to expand our customer base, we expect the percentage contribution of individual customers to our overall performance to also reduce.
GROSS MARGIN
We have seen a slight increase in the year in the gross margin of our international business (52% vs. 51%) and a slight fall in the UK business (66% vs. 68%). In general, this reflects our success in offsetting any fall in the underlying selling price by reduced product costs and product mix changes. The gross margin in the international business has also benefited from increased sales of Gateway licences and End-to-End encryption software. The UK margin has been impacted negatively by the strength of the Euro as the majority of our product costs are in Euros.
Our business model of using local expert distributors for international markets results in a lower average margin on international sales than our direct sales into the UK market. The rapid growth in our international business, which for the first time now exceeds our UK business, has therefore led to a reduction in our overall gross margin to 53% (2007: 55%).
We will continue to invest in cost-reduction programmes, with our value-engineering team working closely with suppliers to reduce the cost of both individual components and manufacturing processes. We anticipate that our investment in manufacturing capability at TCB in China and with Siemens in Eastern Europe will ensure we source products on a cost effective basis and thereby help us to support our margins in the future.
RESEARCH AND DEVELOPMENT COSTS
Our success is built upon the competitiveness of our products, and our R&D investment ensures that we continue to have the right products for our customers. Our gross expenditure on R&D of £13.8m represented an increase of 12% over FY07 expenditure. However, it reduced as a percentage of revenue to 20% (2007: 24%) as we leveraged product enhancements across a larger customer base. Major projects worked on during the year included the new STP8000 hand-held range, wide-band radios, and the ongoing delivery of new software features, functionality and upgrades.
We anticipate that our gross R&D spend will increase in absolute terms in the medium-term as we maintain our investment in products for new markets and refresh the underlying technology across our current product range.
We capitalised 75% (2007: 61%) of R&D expenditure in the year, with the lower capitalisation rate last year reflecting costs on a major project expensed under our accounting policy. After amortisation of previously capitalised costs, our net R&D charge in the income statement was £7.8m (2007: £8.2m). Over the medium-term we expect the net charge to converge with the cash spend.
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES
Selling and marketing costs increased 22% to £8.8m (2007: £7.2m) as we increased our sales and sales support team and our marketing spend in order to take advantage of the market opportunities that lie ahead. We have established representative offices in Germany and China to support our growth in these important markets. Additional business development managers have been recruited as we extend our geographical reach and strengthen our relationships with our distribution partners.
Administrative expenses (excluding IPO costs) were 14% higher at £4.7m (2007: £4.1m). Excluding foreign exchange gains of £1.2m (2007: £nil) arising from movements in the Euro in relation to the settlement of customer and supplier accounts, the increase was 42%. This increase reflects our focus on delivering operational excellence and the related recruitment to help us manage our growth profitably. We have also hired experienced personnel to enable us to comply with the additional responsibilities of being a listed company.
Total selling, marketing and administrative costs (excluding IPO costs) fell as a percentage of revenue to 20% (2007: 22%).
We incurred £2.1m (2007: £1.6m) of costs in relation to our listing in August 2007, which brings the total of such costs since 2006 to £4.3m, in line with the guidance issued at the time our listing. We do not expect to incur any further costs in relation to the listing.
OPERATING PROFIT
Operating profit in the year increased by 65% to £12.5m (2007: £7.6m). Excluding IPO costs, operating profit in the year was £14.7m, an increase of 60%. Operating margin (excluding IPO costs) increased to 22% from 18% in the previous year.
EARNINGS PER SHARE
After adjusting our capital structure for the share reorganisation effected immediately prior to listing, our basic earnings per share was 6.8p per share (2007: 5.3p). As the majority of outstanding employee share options were exercised during the year the impact of potentially dilutive shares was reduced and the diluted earnings per share was 6.3p (2007: 4.4p). Excluding IPO costs, diluted earnings per share was 7.9p, an increase of 41% over the previous year.
CASH FLOW
During the year, the Company generated cash of £7.0m, a cash to operating profit conversion rate of 56% compared to 45% in the previous year (excluding IPO costs paid in the year of £2.5m, cash generated was £9.5m, a conversion ratio of 65%). Cash generated from operations was £24.3m compared to £7.8m in 2007, driven by the increase in operating profit and by a significant improvement in our working capital position, in particular receivables where we improved debtor days to 53 from 68 days in the previous year.
Capital expenditure included £10.4m (2007: £7.5m) of capitalised R&D expenditure. We spent £2.5m (2007: £1.3m) on property, plant and equipment, including £0.8m on test equipment (for the new production facilities in China) and £1.2m (2007: £nil) relating to software and technology licences. The increase in software and technology licence costs relates to the early buy-out of future IPR fees payable to a technology partner for £1.8m, of which £0.9m was paid during the year. This arrangement will result in a significant saving to the Company in future years.
During the year, we made interest payments on our debt and finance lease facilities of £1.3m including amortisation of related fees. We made scheduled repayments of the principal sum on these borrowings of £1.5m. We also paid £0.8m corporation tax in relation to FY 06 and received interest income of £0.7m. At the end of the year we had total cash balances of £15.6m (2007: £8.6m) compared to £13.6m (2007: £15.3m) of borrowings and outstanding finance lease commitments.
TREASURY AND TAXATION
Financing
The Company did not raise any additional capital as part of its listing, reflecting the strong balance sheet and organic cash generation referred to above. The Company has in place a credit facility of £30.0m which was put in place prior to listing. At the end of the year, £15.0m of this facility was unutilised and all covenants had been complied with. We currently have no plans to utilise the remaining facility as we expect to self-fund any additional working capital, capex and development expenditure required as we continue our growth. We propose to maintain the facility as a back-up in the short-term, although we will review this position on a regular basis.
Tax
Our effective tax rate for the year was 28% compared to 18% in the previous year, excluding the impact of our IPO costs the rate was 23% (2007: 15%). This is lower than the standard 30% UK corporation tax rate as we continue to benefit from additional relief on our research and development expenditure, albeit at only 25% in the current year rather than the 50%, which applied to 2007.
The exercise of employee share options immediately prior to listing generated a one-off taxation loss of approximately £35.0m for the Company, the majority of which has been recognised directly in equity rather than in income. As a result of this, we do not expect to pay tax in respect of FY07 or FY08 and we have recognised a deferred tax asset of £8.0m in respect of the value of losses available for offset against future taxable profits. We have also recognised deferred tax liabilities of £4.7m in relation to development costs, which are capitalised under IFRS. Although these do not represent future tax cash payments, they will be released to income as the related costs are amortised.
Treasury
The interest charge for the year was £1.2m (2007: £0.6m), giving interest cover of 12 times (2007: 16 times), based on operating profit before IPO costs. We have in place an interest cap arrangement covering £7.5m of our borrowings, which reduces our exposure to any future significant increases in LIBOR. Interest income was £0.7m (2007: £0.3m), reflecting our increasing cash balances during the period.
The Company invoices primarily in Sterling and Euros, although our international business is impacted by the US Dollar in those locations where the underlying market pricing is in US Dollars. Our exposure to Euro-denominated receivables is partly hedged naturally through the supply of products from our principal manufacturing partner and other suppliers in Europe, although as the international business has expanded we have now put in place a programme of hedging our major Euro exposures.
Given that the end users of our equipment are predominantly Government organisations, we believe our counterparty credit exposure is minimal. We do, however, monitor our credit exposure carefully and use advance payments and letters of credit as appropriate to reduce the risks in this area.
BALANCE SHEET
The Group's balance sheet continues to be strong, with net assets of £28.6m (2007: £13.2m), including £15.6m (2007: £8.6m) of cash. This strength provides us with the flexibility to respond to new opportunities as they arise.
DIVIDEND
The Board has proposed a dividend of 0.85p per Ordinary share, reflecting the policy set out in the listing prospectus. The Board remains committed to this progressive dividend policy, and therefore intends, in the absence of unforeseen circumstances, to distribute approximately 20% of the Company's profit each year, one-third as an interim and two-thirds as a final dividend.
ACCOUNTING POLICIES
The Company was required to transition to IFRS prior to listing, and as part of this process implemented those Standards which where not mandatory at that date but which permitted early adoption. As a result, there have been no changes in accounting policies during the year, and we do not anticipate any material impact on our results for the coming year as a result of the implementation of forthcoming standards.
Consolidated income statement
|
Note |
2008 £'000 |
2007 £'000 |
||
|
Revenue |
3 |
68,105 |
51,987 |
|
|
Cost of sales |
(32,193) |
(23,276) |
||
|
Gross profit |
35,912 |
28,711 |
||
|
Selling and marketing costs |
(8,770) |
(7,188) |
||
|
Research and development costs |
(7,821) |
(8,249) |
||
|
Administrative expenses excluding IPO costs |
(4,675) |
(4,091) |
||
|
IPO costs |
(2,141) |
(1,606) |
||
|
Total administrative expenses |
(6,816) |
(5,697) |
||
|
Other gains |
28 |
- |
||
|
Operating profit |
12,533 |
7,577 |
||
|
Financial income |
654 |
270 |
||
|
Financial expense |
(1,200) |
(577) |
||
|
Net financial expense |
(546) |
(307) |
||
|
Profit before income tax |
11,987 |
7,270 |
||
|
Income tax expense |
(3,319) |
(1,304) |
||
|
Profit for the year attributable to equity holders |
8,668 |
5,966 |
||
|
Earnings per share (p) |
||||
|
Basic |
4 |
6.8 |
5.3 |
|
|
Diluted |
4 |
6.3 |
4.4 |
The results above relate to continuing operations.
Consolidated statement of changes in equity
|
Share capital £'000 |
Retained earnings £'000 |
Total £'000 |
|
|
At 1 April 2006 |
- |
15,406 |
15,406 |
|
Excess tax on share option scheme |
- |
1,596 |
1,596 |
|
Net income recognised directly in equity |
- |
1,596 |
1,596 |
|
Profit for the year |
- |
5,966 |
5,966 |
|
Total recognised income and expense |
- |
7,562 |
7,562 |
|
Employee share option scheme value of employee services |
- |
81 |
81 |
|
Dividends to shareholders |
- |
(9,800) |
(9,800) |
|
At 31 March 2007 |
- |
13,249 |
13,249 |
|
Excess tax on share option scheme |
- |
6,455 |
6,455 |
|
Net income recognised directly in equity |
- |
6,455 |
6,455 |
|
Profit for the year |
- |
8,668 |
8,668 |
|
Total recognised income and expense |
- |
15,123 |
15,123 |
|
Bonus issue |
56 |
(56) |
- |
|
Employee share option scheme: value of employee services |
- |
204 |
204 |
|
Issue of shares |
12 |
- |
12 |
|
At 31 March 2008 |
68 |
28,520 |
28,588 |
Consolidated balance sheet
|
Note |
2008 £'000 |
2007 £'000 |
||
|
Assets |
||||
|
Non-current assets |
||||
|
Intangible assets |
6 |
18,762 |
10,910 |
|
|
Property, plant and equipment |
4,270 |
2,699 |
||
|
Deferred tax asset |
3,596 |
3,507 |
||
|
Total non-current assets |
26,628 |
17,116 |
||
|
Current assets |
||||
|
Inventories |
8,497 |
5,961 |
||
|
Trade and other receivables |
16,134 |
20,066 |
||
|
Derivative financial instruments |
28 |
- |
||
|
Cash and cash equivalents |
15,597 |
8,605 |
||
|
Total current assets |
40,256 |
34,632 |
||
|
Total assets |
66,884 |
51,748 |
||
|
Liabilities |
||||
|
Current liabilities |
||||
|
Borrowings |
(2,952) |
(1,452) |
||
|
Finance lease liabilities |
(273) |
(283) |
||
|
Trade and other payables |
(18,959) |
(16,051) |
||
|
Income tax payable |
(429) |
(1,016) |
||
|
Provisions |
(327) |
(289) |
||
|
Total current liabilities |
(22,940) |
(19,091) |
||
|
Non-current liabilities |
||||
|
Borrowings |
(10,330) |
(13,282) |
||
|
Finance lease liabilities |
- |
(273) |
||
|
Trade and other payables |
(4,418) |
(2,169) |
||
|
Provisions |
(608) |
(411) |
||
|
Deferred tax liabilities |
- |
(3,273) |
||
|
Total non-current liabilities |
(15,356) |
(19,408) |
||
|
Total liabilities |
(38,296) |
(38,499) |
||
|
Net assets |
28,588 |
13,249 |
||
|
Shareholders' equity |
||||
|
Ordinary share capital |
7 |
68 |
- |
|
|
Retained earnings |
28,520 |
13,249 |
||
|
Total shareholders' equity |
28,588 |
13,249 |
Consolidated statement of cash flows
|
Note |
2008 £'000 |
2007 £'000 |
||
|
Cash generated from operations |
8 |
24,252 |
7,783 |
|
|
Income taxes paid |
(813) |
(104) |
||
|
Net cash generated from operating activities |
23,439 |
7,679 |
||
|
Cash flow from investing activities |
||||
|
Interest received |
654 |
270 |
||
|
Purchase of property, plant and equipment |
(2,467) |
(1,320) |
||
|
Capitalised development costs |
(10,380) |
(7,517) |
||
|
Purchase of other intangible assets |
(1,241) |
- |
||
|
Net cash used in investing activities |
(13,434) |
(8,567) |
||
|
Cash flow from financing activities |
||||
|
Proceeds from borrowings |
- |
15,000 |
||
|
Borrowings transaction costs |
- |
(300) |
||
|
Repayments of borrowings |
(1,500) |
- |
||
|
Interest paid |
(1,324) |
(379) |
||
|
Dividends paid to shareholders |
- |
(9,800) |
||
|
Repayment of capital element of finance leases |
(201) |
(186) |
||
|
Issue of share capital |
12 |
- |
||
|
Net cash (used in)/generated from financing activities |
(3,013) |
4,335 |
||
|
Net increase in cash and cash equivalents |
6,992 |
3,447 |
||
|
Cash and cash equivalents at 1 April |
8,605 |
5,158 |
||
|
Cash and cash equivalents at 31 March |
15,597 |
8,605 |
1. General Information
Sepura plc ("the Company") is a public limited company incorporated and domiciled in England and Wales, and whose Ordinary shares of £0.0005 each are traded on the Main Market of the London Stock Exchange. The Company's registered office is Radio House, St Andrew's Road, Cambridge, CB4 1GR, England.
The Board of Directors approved the preliminary announcement on 3 June 2008. Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union, this announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS and does not constitute statutory accounts of the Company within the meaning of section 240 of the Companies Act 1985.
The auditors have reported on the results for the years ended 31 March 2008 and 31 March 2007. Their reports were not qualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Statutory accounts for the year ended 31 March 2008 will be delivered to the Registrar of Companies following the Company's Annual General Meeting on 23 July 2008. .Details of the resolutions to be proposed at that meeting will be included in the notice of Annual General Meeting to be sent to shareholders. Further copies of the report will be available from the Company Secretary and on the Company's website at www.sepura.com.
2. Basis of preparation
This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and International Financial Reporting Interpretations Committee ("IFRIC") recommendations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. For the purposes of the preparation of the consolidated financial information, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 April 2007. There have been no changes in accounting policies during the year.
3. Segment reporting
The Group has a single business segment, being the design, development and distribution of secure digital radios for use on public safety networks operating on the TETRA standard. Distribution is either directly to end-users in the UK, or through our international distribution partners to end-users overseas.
The Group's primary reporting format is by geographical segment, namely UK and international, which is determined by reference to the geographical location of the Group's customers and reflects the distribution channels referred to above. The segments are organised and managed separately according to the sales focus of the management involved, with each segment representing a strategic business unit that serves a different market. All revenue is derived from external operations arising in the UK, and there is no inter-segmental revenue.
With the exception of its sales offices in Germany, the Group does not maintain operating facilities overseas. As a result, all of the Group's assets and liabilities are located in the UK, with the exception of those associated with its German sales offices, inventories in transit to or from customers or suppliers, and test equipment located at suppliers overseas. In order to provide further information on the activities of the Group the following tables allocate the results, assets and liabilities of the Group between the following segments:
Revenues and costs incurred in servicing end-user customers in the UK, together with those assets and liabilities exclusively associated with those customers;
Revenues and costs incurred in servicing our international distribution partners and their end-user customers around the world, together with those assets and liabilities exclusively associated with those customers, such as inventory lines designed for specific frequencies used by a particular overseas market; and
Costs, assets and liabilities which do not relate exclusively to either specific UK or international customers or relate to the operations of the Group as a whole. For example, many individual inventory lines may be utilised by either UK or international customers and are categorised as "unallocated" until such time as they are modified for the exclusive use of, or are despatched to, a particular customer.
3. Segment reporting (continued)
Segment reporting details are provided below:
|
For the year ended 31 March 2008 |
United Kingdom £'000 |
International £'000 |
Unallocated £'000 |
Total £'000 |
|
Income statement information |
||||
|
Segmental revenue |
26,839 |
41,266 |
- |
68,105 |
|
Operating profit |
16,578 |
16,977 |
(21,022) |
12,533 |
|
Net financial expense |
- |
- |
(546) |
(546) |
|
Income tax expense |
- |
- |
(3,319) |
(3,319) |
|
Profit for the year |
16,578 |
16,977 |
(24,887) |
8,668 |
|
Balance sheet information |
||||
|
Segment assets |
||||
|
Intangible fixed assets |
-- |
355 |
18,407 |
18,762 |
|
Property, plant and equipment |
12 |
649 |
3,609 |
4,270 |
|
Deferred tax asset |
- |
- |
3,596 |
3,596 |
|
Inventories |
- |
1,430 |
7,067 |
8,497 |
|
Trade and other receivables |
4,381 |
10,846 |
907 |
16,134 |
|
Derivative financial instruments |
- |
28 |
- |
28 |
|
Cash and cash equivalents |
- |
27 |
15,570 |
15,597 |
|
4,393 |
13,335 |
49,156 |
66,884 |
|
|
Segment liabilities |
||||
|
Borrowings |
- |
- |
(13,282) |
(13,282) |
|
Finance lease liabilities |
- |
- |
(273) |
(273) |
|
Income tax payable |
- |
- |
(429) |
(429) |
|
Trade and other payables |
(6,125) |
(2,899) |
(14,353) |
(23,377) |
|
Provisions |
(507) |
(428) |
- |
(935) |
|
(6,632) |
(3,327) |
(28,337) |
(38,296) |
|
|
Other segment information |
||||
|
Balance sheet items |
||||
|
Capital expenditure: |
||||
|
- Property, plant and equipment |
27 |
731 |
2,070 |
2,828 |
|
- Intangible fixed assets |
- |
146 |
12,346 |
12,492 |
|
Profit and loss items |
||||
|
Depreciation |
15 |
82 |
1,160 |
1,257 |
|
Amortisation |
- |
165 |
4,475 |
4,640 |
|
Share-based payment charge |
1 |
64 |
139 |
204 |
|
Impairment of inventories |
- |
- |
401 |
401 |
3. Segment reporting (continued)
|
For the year ended 31 March 2007 |
United Kingdom £'000 |
International £'000 |
Unallocated £'000 |
Total £'000 |
|
Income statement information |
||||
|
Segmental revenue |
27,444 |
24,543 |
- |
51,987 |
|
Operating profit |
17,777 |
9,054 |
(19,254) |
7,577 |
|
Net financial expense |
- |
- |
(307) |
(307) |
|
Income tax expense |
- |
- |
(1,304) |
(1,304) |
|
Profit for the year |
17,777 |
9,054 |
(20,865) |
5,966 |
|
Balance sheet information |
||||
|
Segment assets |
||||
|
Intangible fixed assets |
- |
374 |
10,536 |
10,910 |
|
Property, plant and equipment |
- |
- |
2,699 |
2,699 |
|
Deferred tax asset |
- |
- |
3,507 |
3,507 |
|
Inventories |
- |
800 |
5,161 |
5,961 |
|
Trade and other receivables |
11,318 |
8,018 |
730 |
20,066 |
|
Cash and cash equivalents |
- |
- |
8,605 |
8,605 |
|
11,318 |
9,192 |
31,238 |
51,748 |
|
|
Segment liabilities |
||||
|
Borrowings |
- |
- |
(14,734) |
(14,734) |
|
Finance lease liabilities |
- |
- |
(556) |
(556) |
|
Income tax payable |
- |
- |
(1,016) |
(1,016) |
|
Trade and other payables |
(4,235) |
(888) |
(13,097) |
(18,220) |
|
Provisions |
- |
- |
(700) |
(700) |
|
Deferred tax liabilities |
- |
- |
(3,273) |
(3,273) |
|
4,235 |
888 |
33,376 |
38,499 |
|
|
Other segment information |
||||
|
Balance sheet items |
||||
|
Capital expenditure: |
||||
|
- Property, plant and equipment |
- |
- |
1,320 |
1,320 |
|
- Intangible fixed assets |
- |
129 |
7,388 |
7,517 |
|
Profit and loss items |
||||
|
Depreciation |
- |
- |
1,043 |
1,043 |
|
Amortisation |
- |
122 |
3,283 |
3,405 |
|
Share-based payment charge |
2 |
73 |
6 |
81 |
|
Impairment of inventories |
435 |
35 |
- |
470 |
4. Earnings per share
|
2008 |
2007 |
||
|
Earnings attributable to ordinary shareholders (£'000) |
8,668 |
5,966 |
|
|
Number of shares |
|||
|
Basic weighted average number of shares ('000) |
128,036 |
112,000 |
|
|
Effect of dilutive securities: |
|||
|
Employee share options ('000) |
9,350 |
24,367 |
|
|
Diluted weighted average number of shares ('000) |
137,386 |
136,367 |
|
|
Basic EPS (p) |
6.8 |
5.3 |
|
|
Diluted EPS (p) |
6.3 |
4.4 |
|
Basic earnings per share has been calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of shares of the Company. For diluted earnings per share, the weighted average number of shares is adjusted to allow for the conversion of all dilutive share options.
5. Dividends
The Directors have proposed a final dividend in respect of the financial year ended 31 March 2008 of 0.85p per Ordinary share, or £1,159,000 based on the Ordinary shares in issue at 31 March 2008. The proposed dividend is subject to approval by shareholders and has not been included as a liability in these financial statements.
The Company paid a dividend of £9,800,000 (representing £12.25 per Ordinary share in issue at the date of payment) during the year ended 31 March 2007.
6. Intangible assets
|
Capitalisation of development costs £'000 |
Software and similar licences £'000 |
Total £'000 |
||
|
CostAt 1 April 2006 |
10,189 |
- |
10,189 |
|
|
Additions |
7,517 |
- |
7,517 |
|
|
At 31 March 2007 |
17,706 |
- |
17,706 |
|
|
Additions |
10,380 |
2,112 |
12,492 |
|
|
At 31 March 2008 |
28,086 |
2,112 |
30,198 |
|
|
AmortisationAt 1 April 2006 |
(3,391) |
- |
(3,391) |
|
|
Charge for the year |
(3,405) |
- |
(3,405) |
|
|
At 31 March 2007 |
(6,796) |
- |
(6,796) |
|
|
Charge for the year |
(4,377) |
(263) |
(4,640) |
|
|
At 31 March 2008 |
(11,173) |
(263) |
(11,436) |
|
|
Net book value At 31 March 2008 |
16,913 |
1,849 |
18,762 |
|
|
At 31 March 2007 |
10,910 |
- |
10,910 |
|
|
At 31 March 2006 |
6,798 |
- |
6,798 |
|
7. Share capital
|
2008 |
2007 |
|||
|
Number |
£ |
Number |
£ |
|
|
Authorised |
||||
|
Ordinary shares of £0.0005 each (2007: £0.0001 each) |
400,000,000 |
200,000 |
1,000,000 |
100 |
|
Allotted, called-up and fully paid |
||||
|
Ordinary shares of £0.0005 each (2007: £0.0001 each) |
136,353,140 |
68,177 |
800,000 |
80 |
During the year the following changes occurred in the Company's issued share capital:
|
2008 |
2007 |
||||||
|
Number |
£ |
Number |
£ |
||||
|
At 1 April |
800,000 |
80 |
800,000 |
80 |
|||
|
Bonus issue |
559,200,000 |
55,920 |
- |
- |
|||
|
5-to-1 share consolidation |
(448,000,000) |
- |
- |
- |
|||
|
Exercise of shares under employee share option scheme |
24,353,140 |
12,177 |
- |
- |
|||
|
At 31 March |
136,353,140 |
68,177 |
800,000 |
80 |
|||
On 18 July 2007 the authorised share capital of the Company was increased from £100 to £200,000 by the creation of 1,999,000,000 Ordinary shares of £0.0001 each. On the same day a bonus issue of 699 new Ordinary shares of £0.0001 each for each Ordinary share of £0.0001 held was made, followed by a share consolidation on the basis of one new Ordinary share of £0.0005 for five Ordinary shares of £0.0001 each, increasing the issued share capital of the Company to 112,000,000 Ordinary shares.
During the year employees exercised options over 24,353,140 (2007: Nil) Ordinary shares.
8. Cash generated from operations
|
2008 £'000 |
2007 £'000 |
|||
|
Profit before income tax |
11,987 |
7,270 |
||
|
Adjustments for: |
||||
|
Depreciation charges |
1,257 |
1,043 |
||
|
Amortisation charges |
4,640 |
3,405 |
||
|
Equity settled share based payment charge |
204 |
81 |
||
|
Gain on derivative financial instruments |
(28) |
- |
||
|
Financial income |
(654) |
(270) |
||
|
Financial expense |
1,200 |
577 |
||
|
Increase in inventories |
(2,536) |
(1,931) |
||
|
Decrease/(increase) in trade and other receivables |
3,850 |
(6,262) |
||
|
Increase in trade and other payables |
4,097 |
3,870 |
||
|
Increase in provisions |
235 |
- |
||
|
Cash generated from operations |
24,252 |
7,783 |
Related Shares:
SEPU.L