Final Results

28 February 2014

Laird PLC

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

Laird PLC today announces results for the financial year ending 31 December 2013. Laird is a global technology company focused on providing components and solutions that protect electronic devices from electromagnetic interference and heat, and that enable wireless connectivity through wireless applications and antennae systems.

Highlights

2013 was the year in which we made a step change in the way we invest in our company. Research and development spend was 28% higher, yielding new products and technologies and demonstrating to our customers that we are a thought leader in our field, as well as a strong partner. We have become an increasingly unified force under a 'One Laird' banner enabling collaborative development, marketing and selling. Finally we have developed our CSR efforts which have enhanced our reputation internally and externally making us more attractive to customers and existing and future employees.

Financial highlights:

· Revenue of £537 million, up 3% on 2012(iii)

· Strong second half organic revenue growth of 8% (first half organic revenue was 7% lower), up 1% for the full year

· Underlying PBIT(i) more than doubled in second half, over the first half of 2013

· Underlying profit before tax(i) for the full year of £60.1 million, down 1%

· Statutory profit before tax £43.2 million(iii) (2012(iii), £45.1 million)

· Operating margin of 12.5% (2012(iii), 13.1%)

· Exceptional items recognised in 2013 of £4.6 million (2012, £2.1 million) (iii) (iv)

· Full year underlying earnings per share(i) of 18.6 pence, down 3%

· Final dividend per share declared of 7.9 pence (2012(iii), 6.6 pence). Total 2013 dividend of 12.0 pence

Operational highlights:

· A stronger second half, as anticipated, with capacity utilised which realised a more than 20% increase in revenue and a more than doubling of profits in the second half of 2013 compared to the first half of the year

· Strong positions on new products launched delivered revenue growth in the second half of the year

· Increased investment in R&D (up 28%) is expected to provide a strong platform for growth

· Innovation and collaboration driving tangible results with new contract wins

David Lockwood, Chief Executive, commented:

"2013 ended with a strong second half. 2014 has commenced with year on year growth consistent with our constant currency expectations for the full year.

The good progress we have made has been grounded in the investments executing our strategy and delivering strategic differentiation. This has deepened our relationships with existing customers and allowed us to win new customers and develop new markets. It is this strategic progress that underpins our confidence for 2014 and beyond.

2014 will see more benefits from innovation, particularly in Wireless Systems, delivered in the second half. This includes the commencement of already secured contracts for next generation M2M products. Our investment in manufacturing capacity in new territories such as Vietnam supports Performance Materials growth in the second half. As a result, as in 2013, we expect 2014 to be second half weighted."

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, goodwill and US capitalised development costs, the gain or loss on disposal of businesses, the impact arising from the fair valuing of financial instruments and acquisition transaction costs. The narrative 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) The weighted average number of shares used to calculate earnings per share was 266.0 million in 2013 and 265.6 million in 2012

(iii) All numbers are for Continuing businesses

(iv) Further commentary contained within this report and in Note 5 of this announcement

Our focus in 2013

Although there was little change in underlying profits year on year, this masks the underlying change in the business. We have generated 0.8% more gross margin and invested it in R&D and collaborative working. We delivered a much stronger second half of the year and exited 2013 with good momentum. Principal drivers of the growth achieved in the second half included major product launches from customers in smartphone and gaming market segments, as well as Laird's own product launches. Aligned to our strategy, in 2013 we stepped up our level of engagement with a leading electronics customer, which is resulting in new capacity in Vietnam together with a design and prototyping centre in South Korea, which will help underpin growth in 2014.

Our operational focus is on our two divisions, Performance Materials and Wireless Systems, and how we ensure alignment of business growth to our overall business strategy.

The Performance Materials division has the ambition to 'own the electronic environment'. At the heart of all the sectors the division serves are printed circuit boards (PCBs) that require controlled and stable conditions to deliver the intelligence that the modern world requires. The division has a unique portfolio of capabilities that can provide the necessary solutions to maintain these stable conditions and which enable it to work in collaboration with its customers to create design options the customer could not have foreseen if it were acting alone.

The Wireless Systems division 'enables wireless communication'. The customers of this division operate in sectors requiring high performance and high reliability. Equally importantly, those customers are restricted by crowded and challenging radio frequency (transmission and interference) (RF) environments. Whether through antenna systems, wireless modules or machine to machine (M2M) solutions, the division is trusted by the major OEMs it serves to ensure the customer's total system will be securely connected.

Strategy

In 2013 we have defined our strategic differentiation: innovation, reliable fulfilment and speed, with the business now focused on these capabilities in day-to-day operations. Our employees are focused on delivering our differentiation and understand it will drive market share and profitable growth. Our customers in turn, recognise our differentiation and that is how and why we are winning new business.

By offering breadth in our product range and innovation in our solutions, we sell into a wide range of customers in markets with attractive growth characteristics. We have focused on penetrating new market segments and geographies as well as selling more products (collaborative selling across our businesses) to existing customers.

We have shown progress in diversifying our customer base and penetrating geographic markets such as China, Korea and Germany. We have made clear progress in China with industrial and automotive customers and won new long-term automotive contracts with leading German automotive OEMs.

Our increased level of R&D investment has brought new contract wins as customers continue to reward us for the innovation we provide. Notable examples include contracts with automotive and telecom customers for whom we have provided innovative solutions for technically challenging products, as well as continuing to be a design partner with smartphone customers on next generation models.

One key aspect of driving change throughout the organisation is how we work together collaboratively and from the actions we have taken in 2013, the whole organisation is increasingly unified in its approach.

Results

Although there was little change in underlying profits year on year, this masks the underlying change in the business. As previously reported the first half of the year showed weakness in some of our principal markets both as a result of the timing of new model launches by some of our major customers and the slowdown in capital investment by other customers associated with Government sequestration measures in the USA.

Revenue for the full year 2013 was £537.0m, up 3% (2012*, £520.2m). In US Dollars, revenue was $839.8m (2012*, $824.1m).

Revenue on an organic basis was 1% higher than prior year in US Dollars (2012*, Flat on prior year).

Sales to Laird's largest OEM customer accounted for 18% of revenue in 2013, a decrease on 2012* (19%). Our focus remains on ensuring Laird supplies the right balance of markets, and OEMs within those markets, in order to ensure that the Group is not over exposed to any one market or customer.

Underlying operating profit was down 1% at £67.2m in 2013 (2012*, £68.1m). In US Dollars, underlying operating profit was $105.0m (2012*, $107.9m). For the year as a whole operating margin was 12.5%, down from 13.1% in 2012*. The margin was lowered to 8.6% in the first half but recovered to 15.7% in the second half.

Underlying profit before tax from continuing businesses was £60.1m in 2013, down 1% (2012*, £60.7m). In US Dollars, underlying profit before tax was $94.0m (2012*, $96.1m). The combined effect of lower volumes and increased spending mentioned above led to a significantly lower result in the first half at £17.3 million. The second half at £42.8 million more than doubled the first half result.

Total exceptional costs for the year were £4.4m (2012, £1.7m), of which £5.0m was in respect of buying out the manufacturing representative agreement in our telematics business, with the majority of the remainder related to costs of changing senior personnel as we further implemented our strategy.

A higher level of R&D in 2013 at £47.6m (2012, £36.6m) reflects Laird's strategy of investing for growth. This reflects our renewed focus on innovation which, together with improvements to our market penetration strategy, is aimed at delivering improved results in future periods.

Underlying earnings per share were 18.6 pence, down 3% on 19.1 pence in 2012*.

*2012 comparatives are based on Continuing businesses.

Dividend

The Board has declared a 2013 final year dividend of 7.9 pence per share (2012 6.6 pence), resulting in a total full year dividend of 12.0 pence (2012, 10.0 pence), in line with the Board's recommendation for dividend payments made in 2011.

The Board's future dividend policy is to increase returns to shareholders over time, while taking account of both the underlying profitability and cash requirements of the business.

Operating Review

Our performance is best analysed by looking in more detail at each division.

Performance Materials 

The division designs and supplies an extensive range of electromagnetic interference (EMI) shielding materials, thermal management solutions and signal integrity products (SIP), providing critical protection for a wide range of electronic devices, allowing them to function and connect effectively. These products isolate and protect sensitive electronic components and systems from the electronic emissions from other components, and filter and remove electromagnetic 'noise' and improve a device's performance through the efficient management of heat.

By product line, the majority of the divisional revenues (66%) in 2013 were from EMI shielding materials, with 24% from thermal management solutions and 10% from signal integrity products.

By market segment, 24% of the division's revenues were from sales of EMI shielding materials to the handset (smartphone) market, 17% were from shielding and thermal solutions used in the IT market and 18% from the telecoms market, with the balance from the automotive, consumer, industrial, medical and military markets.

Divisional revenues increased by 6% in 2013 to £342.8m (2012, £324.7m). Organic revenue growth was 8% lower in the first half but grew 3% overall for the full year (2012, 1%).

Underlying operating profit in the division increased 5% in the year to £51.5m (2012, £48.9m), and operating margin was 15.0% in 2013 - similar to 2012.

The Performance Materials division has continued to penetrate new markets and has expanded its offering to existing customers. A notable success in 2013, delivering a significant uplift in revenues, was business with a gaming console customer which involved products from all three of the division's business units.

EMI

Revenue in the Company's EMI shielding business was down 1% year on year, but strong sales in the second half of the year with demand for electromagnetic shielding components for smartphones and gaming consoles were a significant driver of the second-half uplift.

Revenues for smartphones in 2013 increased with Laird's largest customer and progress was also made in this segment with a leading Asian OEM.

In the tablet market, the maturity of design, and the preference for consumers to favour smaller tablet devices, as well as a broadening of our customers' supply base to mitigate dependency on any one supplier, has resulted in lower Laird content.

The significant uplift in revenue which occurred in the second half of the year, was as anticipated, as customers launched major new products. Our ability to flex our production facilities - one of the core tenets of reliable fulfilment - served us well as we were able to fulfil a substantial increase in demand from major customers by providing a fast ramp up for the pre-launch build.

We have continued to penetrate further the automotive market supplying shielding for audio systems used within vehicles, as well as developing innovative high frequency absorbers which reduce the interference found within automotive and telecom applications.

The telecom market has shown initial signs of expansion during the year from which we expect to see the ongoing benefit from increased demand for both EMI and Thermal solutions.

Thermal

The Thermal businesses' key market segments include Telecoms, IT and Medical, where we have attracted new customers.

Revenue in the Thermal business was up 11% year on year driven by sales of our thermal interface materials product for the IT and telecoms markets. Demand for these products has grown in the year with a significant contributor being revenue from consumer gaming consoles and from market share gains on both gap filler and insulator products.

In our active thermoelectric cooling business, the market has begun to show signs of renewed investment with orders received by North American customers, driven by the build-out for LTE/4G networks. The recently announced link-up of network providers with smartphone providers to widen network coverage in Asia is also expected to be a positive driver of growth for our thermal solutions in 2014.

In February 2013, we announced the acquisition of Nextreme Thermal Solutions. The highly innovative thin-film, high precision cooling it provides is in ultra small form with faster activation rates than conventional cooling solutions. We have expanded the scale of this business and secured contracts in the medical markets - both of which will bring future benefits, albeit at a slower rate of progress than originally anticipated.

Signal Integrity Products

The SIP product line serves customers in the IT, automotive, telecom and consumer markets. Revenue from this business increased by 24% year on year.

Through new product launches and in collaborating with other Performance Materials business units, this business has significantly improved its revenue stream this year. It has broadened its customer base, sold more into the automotive markets, achieved higher revenues in the printer segment and has benefitted from a good share of business on the gaming console launch referred to above.

The continuing demands for electronic devices to be faster, thinner and lighter and yet have more features and increased power, remain key drivers for Laird. Our engineering teams continue to focus on innovative solutions which can protect and package our customers' next generation products and during 2013 we have emphasised our focus on markets where we can add value to our customers as they continue their product evolution. Our ability to rapidly ramp up production is also being recognised by new and existing customers who want reliability in delivery and this, combined with our design capabilities, will allow us to capture new opportunities for growth.

Wireless Systems

The division designs and supplies a range of telematics and infrastructure antennae products, M2M wireless modules and software-enabled wireless control systems, used in a broad range of markets including wireless infrastructure, automotive, asset management, transportation, industrial, mining, datacom, medical and retail markets.

By product line, Telematics/M2M accounted for 59% of divisional revenues in 2013, with 22% from Wireless Automation and Control Solutions, and 19% from Infrastructure Antennae Solutions.

By market segment, 61% of the division's revenues were from the transportation market. 16% were from industrial applications and 19% from the IT/telecom sector, with the balance coming from other markets such as Consumer and IT.

Divisional revenues fell by 1% in 2013 to £194.2m (2012, £195.5m). Revenue on an organic basis was 6% lower at the half year and 3% lower for the full year (2012, 1% higher). This result was due to the absence of a significant rebound in industrial and public safety markets.

The division's underlying operating profit decreased 12% in the year to £22.7m (2012, £25.8m). Operating margin decreased to 11.7% from 13.2% in 2012.

With 61% of its revenues in the Automotive and Transportation markets, product life cycles in this division are, on average, longer than Performance Materials and visibility is greater. As within Performance Materials, there have been significant efforts to offer comprehensive solutions to customers combining different product lines which will help drive sustainable growth.

Telematics/M2M

Revenues in the Telematics/M2M business were 2% higher year on year. The underlying growth in telematics has been driven by demand in the automotive markets and has more than offset the effect of exiting lower margin M2M tracking products. A significant automotive M2M contract won in a prior year, will commence in 2014, and is expected to be a driver of future revenue growth in North America. During the year, the new business won with major European OEMs will grow our market share in that region when the products are launched in 2015 and beyond. We have also won business with a Chinese OEM, a market where the penetration of our products is low but where there is great market opportunity.

The M2M side of the business has had lower revenue during the year as Bluetooth models were phased out ahead of new generation launches with upgraded firmware and software and with multiple features. This product range refresh has now been completed and is expected to deliver revenue growth in 2014. We have elected to move away from more commoditised markets and focus on technology development where we can provide differentiated solutions to customers.

We have continued to build our presence in the medical device market, partnering with leading customers and completing the development of a new range of modules which will launch in 2014.

Wireless Automation and Control Solutions

Revenue was 1% lower in the Wireless Automation and Control Solutions business due to some softness in the industrial markets and the continued deferral of spending on rail replacement programmes. After-market services revenues have partially offset reduced new system sales and we saw a pick-up in rail revenues towards the end of the year. For our rail customers we provide replacement equipment to improve safety and efficiency that allows personnel to operate rail locomotives remotely. The business has started to work closely with Telematics/M2M, leveraging off its software and firmware skillset to develop and upgrade the wireless asset management monitoring service offering.

During the year, progress has been made in penetrating the Asian market with new customer contracts secured.

Infrastructure Antennae

Revenue from the Infrastructure Antennae Systems business was 13% lower as a result of weaker demand from the industrial and public safety markets where sequestration measures in the USA have had a significant impact on spending.

We have also experienced lower demand from significant customers in the telecoms market for some wireless internet services. This is a market that remains volatile.

Demand in the second half of the year has been driven by a return to spending by non governmental infrastructure markets and robust sales for our WLAN products to an existing networking customer. A collaboration project to offer innovative combined infrastructure antennae with our M2M radio modules has resulted in a new product family being developed which has been well received by customers. We have remained focused on new product development in this business with launches for indoor wireless antennae and further development on multiple in-multiple out (MIMO) panels for wireless local area networks for high data capacity environments.

Ubiquitous connectivity and the 'Internet of Things' continues to require smart systems to serve a range of markets from industrial to automotive. Laird has proved itself to be a supplier of choice to facilitate infotainment systems in vehicles and provide for wireless connectivity in public infrastructure and medical markets. These markets are increasingly looking to wirelessly enabled devices to aid productivity and increase safety.

The value-add solutions - which combine software diagnostics with hardware - and control systems Laird provides, can be offered as a complementary extension of our core wireless module applications. This allows us to provide technology for networks through point-to-point connectivity - which broadens the opportunities available to us.

Board changes

There have been further changes made to refresh the Laird Board in 2013.

Jack Boyer joined the Board in May. After serving nine years as a non-executive director, Tony Reading retired in August. Tony was succeeded by Jack as Chair of the Remuneration Committee. Following Tony's departure, Paula Bell was appointed Senior Independent Director.

In November it was announced that Nigel Keen would be stepping down as Chairman at the Annual General Meeting in May 2014, to be succeeded by Dr Martin Read. Martin today joins the Laird Board. Nigel has overseen a period of considerable change at Laird during his tenure as Chairman including the recent and ongoing transition of the Laird Board, and the appointment of David Lockwood as Chief Executive in 2012.

Outlook

2013 ended with a strong second half. 2014 has commenced with year on year growth consistent with our constant currency expectations for the full year.

The good progress we have made has been grounded in the investments executing our strategy and delivering strategic differentiation. This has deepened our relationships with existing customers and allowed us to win new customers and develop new markets. It is this strategic progress that underpins our confidence for 2014 and beyond.

2014 will see more benefits from innovation, particularly in Wireless Systems, delivered in the second half. This includes the commencement of already secured contracts for next generation M2M products. Our investment in manufacturing capacity in new territories such as Vietnam supports Performance Materials growth in the second half. As a result, as in 2013, we expect 2014 to be second half weighted.

FINANCIAL REVIEW

Segments

Laird has two segments; Performance Materials and Wireless Systems.

Revenue

Revenue increased by 3% to £537.0m for the full year in 2013 from £520.2m in 2012. In US$, the increase was 2%.

In US$, Performance Materials revenues were 4% higher and Wireless Systems revenues were 2% lower. The table below shows revenue for each segment in US$ together with the incremental revenue contribution from acquisitions made part way through 2012 and in 2013.

Revenue on an organic basis was 1% higher in 2013 over 2012. Revenue on an organic basis is defined as the increase or decrease in revenue, year on year, with the base revenue for the prior year including revenue from the newly acquired companies as if Laird had owned those acquired companies for the same period in the prior year.

Segmental revenue is also disclosed in note 3.

Revenue from the largest customer, including revenue invoiced indirectly through its suppliers, amounted to 18% of revenue (2012, 19%). The top five customers accounted for 34% of revenue (including revenue invoiced indirectly through their suppliers) in 2013 (2012, 36%).

Underlying operating profit / Operating margin

The table that follows shows underlying operating profit for the business segments in US Dollars for 2013 and the comparative data for 2012. The net operating margin was 12.5% (2012, 13.1%).

Operating margin for Performance Materials was 15.0% in 2013 (2012, 15.1%) and for Wireless Systems operating margin was lower at 11.7% (2012, 13.2%).

The table below provides further analysis in US$ of the underlying operating profit. The gross profit percentage of 40.8% is 0.8% higher than in 2012.

R&D expenditure has risen to 8.9% of revenue against 7.0% in 2012. Much of the increase in R&D is in Wireless Systems which typically has design cycles beyond one year and longer product lives than Performance Materials. A proportion of this investment has been capitalised and typically will be amortised over a three to four year period and matched against the revenue benefit.

Two companies were acquired part way through 2012 and Nextreme was acquired in 2013. $5.0m of the R&D increase ($3.1m net of capitalised development) and $3.0m of the indirect overhead increase is due to the full year impact of the 2012 acquisitions and a part year of the 2013 acquisition.

The bar chart below (linked) is a high level profit bridge of the change in underlying operating profit from 2012 and 2013. The impact of acquisitions has been broken out in order to provide a better understanding of the changes in the base business.

http://www.rns-pdf.londonstockexchange.com/rns/1876B_1-2014-2-28.pdf

†† margin drop through on reduction in organic revenue, year on year

The increase in gross margin of $8.4m arises from the increase in revenue on an organic basis together with an increase in average gross margins. The margin increase has been more than offset by the $5.9m increased investment in net R&D (gross R&D less net capitalised development), the $3.8m increase in indirect overheads and the net loss from the incremental contribution of $1.6m from acquisitions.

Profit

Profit before tax from continuing operations was £43.2m (2012, £45.1m). Profit for the year after taxation and after discontinued operations was £30.8m (2012, £46.5m).

Underlying Profit

Underlying profit before tax in the year was £60.1m (2012, £60.7m). Underlying profit is defined as profit before tax, exceptional items, amortisation of acquired intangible assets, goodwill and US capitalised development costs, the gain or loss on sale of businesses, the impact arising from the fair valuing of financial instruments, and acquisition transaction costs, as set out in note 8.

Exceptional costs

Exceptional costs in the period amounted to £4.6m for continuing operations (2012, £2.1m). Exceptional costs were reduced by a £4.7m reduction to the assessment of the earnout that could be payable for the Nextreme acquisition. £5.0m of the exceptional cost was due to the buyout by the Telematics business of its existing manufacturing representative agreement to allow a more direct approach to market. The cash outlay for the buyout does not occur until 2014 and later. Much of the balance of the expenditure relates to changes in senior personnel, to align senior management with the new culture and further allow implementation of the strategy.

Finance costs

Finance costs, excluding a profit on the fair valuing of financial instruments of £1.3m (2012, £0.4m) were £7.1m, compared to £7.4m in 2012.

Taxation

The underlying tax charge on total underlying profit before tax is equivalent to an average tax rate of 17.5% (2012, 16.5%). Due to the proportion of profit generated in China, the average tax rate is expected to increase in 2014 and be in the range 18% to 19%.

Profits in the USA continue to be sheltered by amortised goodwill deductions resulting from acquisitions and profits in the Czech Republic are sheltered by incentives. Laird's tax payable largely arises in China and Germany.

Underlying earnings

Continuing underlying earnings per share were 18.6 pence (2012, 19.1 pence). Underlying earnings are based on underlying profit less underlying tax and exclude deferred tax on acquired intangible assets, goodwill and US capitalised development costs. The average number of shares in issue throughout 2013 was 266.0 million (2012, 265.6 million).

Cash Flow

The table below provides a further analysis of cash flow to complement the notes to the Accounts.

* after adjusting for creditor increases on exceptional items of £5.8m (2012, decreases of £12.4m)

Cash conversion (operating cash flow as a proportion of operating profit) for continuing operations in 2013 was 65% against 109% in 2012. The rate in 2012 was unusually high due to a £7.5 million working capital inflow, whereas a small outflow would have been expected. As expected this reversed early in 2013 and therefore had an adverse impact on 2013 cash conversion. For the two years consecutively together, cash conversion was just under 90% consistent with the healthy level of cash generation which Laird targets.

Treasury policies

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

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

Interest rate risk

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

Credit and counterparty risk

Laird's policy on counterparty risk management is to place cash deposits and other financial instruments with its relationship banks, all of which also provide credit facilities to Laird. The level of exposure to each bank is continually monitored. As at 31 December 2013 all cash and short-term deposits had a maturity of less than three months.

Foreign exchange management

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

Foreign currency borrowings are used partially to hedge the currencies of the Group's principal assets and cash flows. Where foreign currency borrowings are in the same currency as investment in overseas assets they are treated as a hedge of the net investment.

Net borrowings and debt facilities

Net borrowings were £109.5m (2012, £106.8m).

A cornerstone of our financial planning is to ensure that the Group maintains committed loan finance which provides sufficient headroom above expected borrowing requirements and has a significant proportion with terms that exceed one year. Laird has £235m (2012, £235m) of bilateral revolving credit facilities which do not expire until April 2016.

In addition, Laird has in issue $140.0m (£84.5m) of US Dollar Private Placement notes which have have remaining terms of just under one year (2014, $97.0m), and three years (2016, $43.0m).

Covenants

A key consideration for financial planning is to maintain sufficient headroom between borrowings and the ceiling set by the covenants. Laird'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 2013, net borrowings were 1.3 times EBITDA, 37% of the maximum permitted of 3.5 times. Interest cover was 10.2 times against the minimum requirement of 3.0 times. Thus, there was considerable financial headroom.

The expected headroom is routinely estimated against the covenants and the sensitivity to a number of alternative scenarios is tested to ensure ongoingcompliance. The Group does not anticipate approaching its covenant limits in the foreseeable future.

Currencies in 2013

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

In 2013, circa 75% of revenues were negotiated in US$. With circa 45% of the cost base in US$, there is a large US$ surplus. Approximately 10% of revenues are negotiated in each of the Renminbi and Euro.

In most currencies (other than US$ and Euro), costs exceed revenues, the most significant being the Renminbi (RMB) which accounts for approximately 34% of Laird's cost base. This imbalance can lead to an adverse impact, in so far as the strengthening of the RMB may not be fully recovered in US$ selling prices.

In addition, there is a translation impact in converting profits into the Group's reporting currency (Sterling); each US$0.01 appreciation against sterling approximates to an annual increase in operating profit of £0.4m. In 2013, on average through the year the US$ was stronger against sterling than in 2012 and this increased profits on translation by £0.5m.

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

Pensions

There are 29 employees who are active members of defined benefit plans and approximately 1,600 deferred and current pensioners. There is an overall defined benefit pension scheme deficit under IAS 19 (Revised 2011) of £3.7m at 31 December 2013 which is more than accounted for by the unfunded schemes of £6.4 million as the funded schemes are in surplus. At 31 December 2012, there was an overall deficit of £1.5m.

The principal driver of the year-on-year change in the deficit was an increase in the inflation assumption from 3.15% in 2012 to 3.6% in 2013, which contributed to the increase in the estimate of liabilities. 

Shareholders' funds

Shareholders' funds at the 2013 year end were £436.1m (2012, £440.9m). The reconciliation is set out in the Group statement of changes in equity.

Return on capital employed

Return on capital employed (underlying profit before interest and tax as a proportion of average shareholders' funds plus net borrowings during the year) was 12.0% in 2013 compared to 12.4% in 2012.

The following statements are extracted from the Annual Report and Accounts 2013 and are repeated here for the purposes of compliance with DTR 6.3.5. These statements relate solely to the Annual Report and Accounts 2013 and are not connected to the extracted information set out in this announcement or the Preliminary Announcement.

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

Each of the directors, whose names and functions are listed in the Annual Report and Accounts 2013, confirm that, to the best of each person's knowledge and belief:

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

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

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

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

Each of the directors, whose names and functions are listed in the Annual Report and Accounts 2013, confirm that, to the best of each person's knowledge and belief:

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

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

By order of the Board

David Lockwood Jonathan Silver

Chief Executive Chief Financial Officer

27 February 2014

Group income statement

for the year to 31 December 2013

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

Group statement of comprehensive income

for the year to 31 December 2013

Group statement of changes in equity

for the year to 31 December 2013

for the year to 31 December 2012

for the year to 31 December 2013

Group statement of financial position

as at 31 December 2013

The accounts were approved by the Board of Directors on 27 February 2014 and were signed on its behalf by:

D C LOCKWOOD

J C SILVER

Directors

Group cash flow statement

for the year to 31 December 2013

Notes to the financial statements

for the year ended 31 December 2013

1. Corporate information

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

The consolidated financial statements of the Group for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors on 27 February 2014.

2. Basis of preparation

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

(b) The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. The consolidated financial statements have been prepared in accordance with the accounting policies followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2013.

The financial information set out in this document does not constitute the Group's statutory accounts for the year ended 31 December 2013 or 31 December 2012. The annual report and financial statements for the year ended 31 December 2013 were approved by the Board of Directors on 27 February 2014 along with this preliminary announcement, but have not yet been delivered to the Registrar of Companies. The auditor's report on the statutory accounts for the year ended 31 December 2013 was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012 have been delivered to the Registrar of Companies. The auditor's report on the statutory accounts for the year ended 31 December 2012 was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The 2013 annual report and financial statements, together with details of the Annual General Meeting, will be despatched to shareholders on 20 March 2014. The Annual General Meeting will take place at 2 May 2014.

Notes to the financial statements

for the year ended 31 December 2013

3 Segmental analysis

The reportable segments for continuing operations (as defined by IFRS5) are as follows:

· Performance Materials - designs and supplies a range of EMI shielding materials, thermal management

solutions and signal integrity products to a wide variety of electronic devices, and

· Wireless Systems - designs and supplies a range of high specification wireless antennae, and machine-

to-machine ("M2M") wireless modules for a number of markets including infrastructure and automotive

markets.

The Group did not have any inter-segment revenue in 2013 and 2012.

Revenue from one customer of the Performance Materials division and Wireless Systems division represents approximately £84.9m (2012, £91.0m) of the Group's total revenues.

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

\* These relate to other business segments disposed of in years before 2013

Notes to the financial statements

for the year ended 31 December 2013

3 Segmental analysis (continued)

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

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

Notes to the financial statements

for the year ended 31 December 2013

4 Operating profit before finance costs and tax  

Note

(a) Included in selling, administration and other expenses are £4.6m (2012, £2.1m) of exceptional items as described in note 7 to the financial statements and £13.6m (2012, £13.9m) of amortisation relating to acquired intangible assets.

 (b) Included in research and development expenditure is £3.6m (2012, £5.3m) of amortisation in respect of capitalised development costs.

 (c) Cost of inventories recognised as an expense within cost of sales was £215.2m (2012, £221.6m).

Notes to the financial statements

for the year ended 31 December 2013

4 Operating profit before finance costs and tax  (continued)

* Total fees paid to the auditor were £2.2m (2012, £2.3m).

Notes to the financial statements

for the year ended 31 December 2013

5 Exceptional items

 Note

(a) The total cash outlay for exceptional costs in 2013 was £3.2m (2012, £13.3m).

 (b) The tax effect on exceptional items in 2013 is a £0.7m tax credit (2012, £0.2m tax charge).

 (c) Restructuring costs include redundancy costs of £1.7m (2012, £0.1m) and site rationalisation and closure costs of £1.6m (2012, £1.3m).

 (d) The buyout of a Manufacturing Representative agreement for £5.0m (2012, £Nil) was in the Telematics/M2M business within Wireless Systems. There was no cash outlay in 2013 (2012, £Nil).  

(e) Discontinued operations comprise the Handset Antennae business.

Notes to the financial statements

for the year ended 31 December 2013

6 Discontinued operations

Discontinued operations comprise the Handset Antennae business. An agreement was completed on 2 November 2012 with Shenzhen Sunway Communication Co., Ltd ("Sunway") to dispose of the entire issued share capital of Laird Technologies (Beijing ) Co., Ltd for a cash consideration of £17.5m. Laird Technologies (Beijing ) Co., Ltd was the owner of assets which are associated with the Handset Antennae business. The profit on prior year disposals of £0.4m in 2013 relates to the Handset Antennae business and the £2.6m in 2012, represents a reassessment of provisions for warranty claims.

7  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 profit but with the number of shares increased to reflect the daily average effect of relevant share options granted but not yet exercised where performance conditions have been met and shares contingently issuable.

Notes to the financial statements

for the year ended 31 December 2013

8 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 17.5% (2012, 16.5%) of underlying profit before tax.

Notes to the financial statements

for the year ended 31 December 2013

9 Dividends paid and proposed

On 27 February 2014 the Board declared, subject to approval from shareholders, a final dividend of 7.9p per share (2012, 6.6p). The final dividend will be paid on 4 July 2014 to shareholders registered on 6 June 2014. 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.