23rd Feb 2006 07:02
Spirent PLC23 February 2006 SPIRENT PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 2005 London, UK - 23 February 2006: Spirent plc (LSE: SPT; NYSE: SPM), a leadingcommunications technology company, today announces its preliminary results forthe year to 31 December 2005. Summary of results £ million 2005 2004 Change %----------------------------------- ---------- ---------- ---------- Continuing GroupRevenue 259.3 287.2 (10)Operating profit1 11.5 22.9 (50)Adjusted profit before tax2 4.9 15.4 (68)Reported (loss)/profit before tax (41.7) 11.2 -Basic (loss)/earnings per share (pence) (3.97) 0.98 - Total GroupAdjusted earnings per share3 (pence) 2.30 3.14 (27)----------------------------------- --------- ---------- ---------- The HellermannTyton Division has been treated as a discontinued operation inaccordance with International Financial Reporting Standards. The table above andthe text below relate to continuing operations only unless otherwise stated. Strategic progress • The disposal of the HellermannTyton Division for £288.9 million, announced on 15 December 2005, was completed on 15 February 2006. Proceeds are being used to repay debt, substantially fund the pension scheme, buy back up to £50 million of shares and make selective acquisitions. • We have transformed Spirent into a focused communications company with a significantly improved financial position. • The acquisitions of SwissQual and QuadTex in 2006 will enhance Spirent's market presence and enable our entry into new and growing markets. Overview of results • We took firm actions to address the losses in Service Assurance that negatively impacted the first half, which resulted in recovery in the second half. Performance Analysis • Overall revenues and operating profit1 were slightly ahead of 2004. • Activity levels in the fourth quarter recovered somewhat following a weaker third quarter. • Our wireless activities had a record year, with sales growing by 17%. • Launch of the new unified platform, Spirent TestCenterTM, has resulted in competitive wins with new and existing customers in the second half. Further progress will be made through the addition of greater functionality and automation over the next 18 months. Service Assurance • The division stabilised in the second half reporting a significantly reduced operating loss1 of £0.6 million (first half operating loss1: £9.0 million). • We are concentrating on the development of new solutions for triple play and advanced business services. Systems • The group grew revenue by 20% to £37.7 million and operating profit1 by 29% to £4.4 million. Notes1 Before material one-time items, goodwill impairment and share-based payment.2 Before material one-time items, goodwill impairment, share-based payment, profit on the disposal of operations and costs associated with the part prepayment of loan notes.3 Adjusted earnings per share is based on adjusted earnings as set out in note 4 to this report. Commenting on the results, Anders Gustafsson, Chief Executive, said: "The disposal of the HellermannTyton Division has transformed Spirent into afocused communications company, as well as having significantly improved ourfinancial position. Spirent is well placed to grow organically from itsestablished market-leading positions. We also have the potential to expandthrough selective acquisitions, such as SwissQual and QuadTex, announced in2006. "The variable market conditions seen in 2005 have continued through thebeginning of the first quarter, which is usually our quietest. As 2006progresses, the year will be a period of product transition as the increasedcapability of our new products and solutions will enable us to gain marketshare. As a result, we anticipate that the Group's performance for 2006 willshow recovery over last year, with a more pronounced seasonal increase inactivity in the second half." - ends - Enquiries Anders Gustafsson, Chief Executive Spirent plc +44 (0)1293 767676Eric Hutchinson, Finance Director Reg Hoare Smithfield +44 (0)20 7360 4900Katie Hunt The Company will host a results presentation today at 09.15 for 09.30 UK time. A simultaneous webcast of the presentation will be available on the Spirent plc website at www.spirent.com. Photography is available from UPPA (Universal Pictorial Press & Agency) - www.uppa.co.uk or tel: +44 (0)20 7421 6000 About Spirent Spirent is a leading communications technology company focused on deliveringinnovative systems and services to meet the needs of customers worldwide. We area global provider of performance analysis and service assurance solutions thatenable the development and deployment of next-generation networking technologiessuch as broadband services, Internet telephony, 3G wireless and web applicationsand security testing. The Systems group develops power control systems forspecialist electrical vehicles in the mobility and industrial markets. Furtherinformation about Spirent plc can be found at www.spirent.com Spirent Ordinary shares are traded on the London Stock Exchange (ticker: SPT)and on the New York Stock Exchange (ticker: SPM; CUSIP number: 84856M209) in theform of American Depositary Shares (ADS), represented by American DepositaryReceipts, with one ADS representing four Ordinary shares. Spirent and the Spirent logo are trademarks or registered trademarks of Spirentplc. All other trademarks or registered trademarks mentioned herein are held bytheir respective companies. All rights reserved. This press release may contain forward-looking statements (as that term isdefined in the United States Private Securities Litigation Reform Act of 1995)based on current expectations or beliefs, as well as assumptions about futureevents. You can sometimes, but not always, identify these statements by the useof a date in the future or such words as "will", "anticipate", "estimate","expect", "project", "intend", "plan", "should", "may", "assume" and othersimilar words. By their nature, forward-looking statements are inherentlypredictive and speculative and involve risk and uncertainty because they relateto events and depend on circumstances that will occur in the future. You shouldnot place undue reliance on these forward-looking statements, which are not aguarantee of future performance and are subject to factors that could cause ouractual results to differ materially from those expressed or implied by thesestatements. Such factors include, but are not limited to: the extent to whichcustomers continue to invest in next-generation technology and deploy advancedIP-based services; our ability to successfully expand our customer base; ourability to continue to benefit from generally improving market conditions; theprevailing market conditions and pace of economic recovery; our ability toimprove efficiency, achieve the benefits of our cost reduction goals and adaptto economic changes and other changes in demand or market conditions; ourability to develop and commercialise new products and services, extend ourexisting capabilities in IP services and expand our product offeringinternationally; our ability to attract and retain qualified personnel; theeffects of competition on our business; fluctuations in exchange rates and heavyexposure to a weak US dollar; changes in the business, financial condition orprospects of one or more of our major customers; risks of doing businessinternationally; risks relating to the acquisition or sale of businesses and oursubsequent ability to integrate businesses; our reliance on proprietarytechnology; our exposure to liabilities for product defects; our reliance onthird party manufacturers and suppliers; and other risks described from time totime in Spirent plc's Securities and Exchange Commission periodic reports andfilings. The Company undertakes no obligation to update any forward-lookingstatements contained in this press release, whether as a result of newinformation, future events or otherwise. REPORT FOR THE YEAR TO 31 DECEMBER 2005 Operating profit/(loss) and return on sales are used by the Group as keymeasures of operating performance and are stated in the text before the effectof material one-time items, goodwill impairment and share-based payment so thatperiod on period comparisons are not distorted. The HellermannTyton Division for the purposes of these results has beenpresented as a discontinued operation and our financial results are presentedand discussed for the continuing Spirent Group unless otherwise stated. CHAIRMAN'S STATEMENT In 2005 Spirent was transformed into a focused communications business. In thefirst half of the year, we carried out major restructuring within the ServiceAssurance division. In December we announced the proposed disposal of theHellermannTyton Division and our share of its associated companies to fundscontrolled by Doughty Hanson & Co Limited ("Doughty Hanson"). We believe theconsideration of approximately £288.9 million, at a cash free/debt freeequivalent value, represents fair value for the business and reflects its strongperformance under our management. As a result of this sale, the Group'sfinancial position has been significantly strengthened. Following approval by shareholders at an Extraordinary General Meeting held on24 January 2006, the disposal was completed on 15 February 2006. As previouslyindicated, the proceeds have been used to repay the outstanding loan notes of£71.5 million together with the make whole amount of £7.4 million and associatedswap break fees of £2.3 million. In addition a special contribution of £47.0million has been made to substantially fund the UK final salary pension schemeand the Board intends to return up to £50 million to shareholders through anon-market share repurchase programme over the coming year. To reflect the transformation of the Group, a proposal will be made at theforthcoming AGM to rename Spirent plc as Spirent Communications plc. James Wyness will retire from the Board with effect from the date of the 2006Annual General Meeting and we would like to thank him for his valuablecontribution during his long service as a non-executive director, MarcusBeresford will assume the responsibilities of the senior independent director onJames' retirement. I would like to take this opportunity to thank all of our employees for theircontribution during this year of transformation. We wish the employees ofHellermannTyton success under their new ownership and thank them for theircontribution over many years. CHIEF EXECUTIVE'S OVERVIEW Introduction and strategy Since joining Spirent as Chief Executive I have set out to transform the Groupinto a focused communications company. During 2005 we have been busy reshapingand restructuring the business culminating in the disposal of HellermannTyton,as well as starting in 2006 to make selective acquisitions. The decision to focus on communications reflects our view that the sector offersSpirent the best top and bottom line growth opportunities in the mid and longterm, leveraging our leading market positions in our key product segments. We are therefore continuing to invest in organic growth opportunities throughresearch and development and sales and marketing activities and the launch ofnew products such as the Spirent TestCenter(TM). We will also continue to make selective acquisitions. These acquisitions will bea good strategic fit with our existing activities as well as expanding ourcustomer base, broadening our geographic coverage or enabling entry into newmarkets. The principal strategic drivers for acquisition are to expand ourmarket position and our competitive offering into markets where we see stronggrowth opportunities. This will ensure that we remain a core supplier to ourcustomers, whilst at the same time accelerating our development plans to keepahead of competition. We will shortly establish our operational headquarters in Sunnyvale, California,in the centre of Silicon Valley where we have the highest concentration ofcustomers. I will relocate in the spring, but we will maintain a small corporateheadquarters in the UK. Results overview The Group's 2005 results were principally affected by the operating lossesincurred by the Service Assurance division, which were described in detail atthe time of the interim results in August 2005. These losses were substantiallyreduced in the second half as a result of the actions we took in the first half. Material one-time items of £8.4 million have been expensed in the year. Of this£3.9 million is in relation to restructuring actions in the Service Assurancedivision and £1.4 million for inventory write-downs again in this division.Other material one-time items of £3.1 million have been taken in relation tosupply chain initiatives and other restructuring actions within the Group. Thiswas reported in our interim results. In the first half we took a goodwill impairment charge of £37.0 million due tothe drop in activity in the Service Assurance division. Performance Analysis Revenue and operating profit in the Performance Analysis division for 2005 wereslightly up on 2004. In this division several of our end markets were weakerthan had been anticipated earlier in the year, particularly so in the thirdquarter, although activity in the fourth quarter did recover somewhat. Inaddition, we are in a product transition phase as we progressively introduce newand improved products and solutions. Encouragingly, sales to some of our largestcustomers in the equipment manufacturing sector grew by more than 30 per centand the division's wireless and position location test activities experiencedtheir best year ever. Service Assurance Revenue in the Service Assurance division was down 43 per cent compared with2004 and as a result the division reported an operating loss of £9.6 million ofwhich £9.0 million was incurred in the first half. In the first quarter of 2005our major customers, the US service providers, had delayed the release of theirfull capital spending budgets partly due to merger activity, with a largerproportion of these budgets shifting towards next-generation rather thanexisting networks. As these trends became apparent we undertook significantrestructuring actions in the division, including changing senior management,reducing headcount by around 260 (approximately 40 per cent of the totalworkforce) which resulted in a much reduced loss for the second half of £0.6million. During 2005 we have refocused our product development efforts togenerate new solutions for triple play and advanced business services; this willcontinue through 2006. Systems Our Systems group grew revenue and operating profit by 20 per cent and 29 percent respectively, benefiting from the launch of two new wheelchair controlsystems. Acquisitions in 2006 On 23 January 2006, we announced the acquisition of SwissQual Holding AG("SwissQual") for an initial consideration of £27.7 million paid in cash, withup to a further £12.4 million payable depending on revenue growth and varioustechnical and financial milestones. SwissQual provides world class products andtalent in the development of voice and video solutions that analyse, recogniseand improve the quality of experience for users of wireless applications andservices. We also announced on 13 February 2006 the acquisition of QuadTex Systems, Inc("QuadTex") for an initial consideration of £4.2 million with furtherconsideration of up to £0.9 million. QuadTex is a fast growing US based providerof innovative and leading test tools for internet protocol multimedia subsystems("IMS") and voice over IP ("VoIP") testing. SwissQual and QuadTex will enhance Spirent's product offerings, capabilities andcustomer base in the wireless, triple play and IMS markets. Outlook The disposal of the HellermannTyton Division has transformed Spirent into afocused communications company, as well as having significantly improved ourfinancial position. Spirent is well placed to grow organically from itsestablished market-leading positions. We also have the potential to expandthrough selective acquisitions, such as SwissQual and QuadTex, announced in2006. The variable market conditions seen in 2005 have continued through the beginningof the first quarter, which is usually our quietest. As 2006 progresses, theyear will be a period of product transition as the increased capability of ournew products and solutions will enable us to gain market share. As a result, weanticipate that the Group's performance for 2006 will show recovery over lastyear, with a more pronounced seasonal increase in activity in the second half. OPERATING REVIEW Communications £ million 2005 2004 Change % ---------------------------- --------- --------- --------- Revenue Performance Analysis 178.8 176.8 1 Service Assurance 42.8 74.7 (43) ---------------------------- --------- --------- Communications group 221.6 251.5 (12) Operating profit/(loss) Performance Analysis 22.0 21.7 1 Service Assurance (9.6) 2.5 - ---------------------------- --------- --------- Communications group 12.4 24.2 (49) Return on sales (%) Performance Analysis 12.3 12.3 Service Assurance - 3.3 Communications group 5.6 9.6 ---------------------------- --------- --------- Our Communications group, Spirent Communications, works behind the scenes tohelp the world communicate faster, better and more efficiently. The world'sleading communications companies use Spirent solutions to conduct performanceanalysis tests in labs on their latest technologies. As new communicationsservices are introduced Spirent provides the tools to facilitate troubleshootingand improve the quality of these new networks and services. Revenue and operating profit in the Performance Analysis division was slightlyup. In this division we experienced variability in terms of end customer demandprincipally in the third quarter and in the broadband test activities, with thedivision's wireless and position location test activities experiencing goodgrowth. In 2005 the operating loss in the Service Assurance division, althoughsubstantially reduced in the second half year, affected the performance of theCommunications group as a whole. Indeed, revenue in the Service Assurance division was down 43 per cent comparedwith 2004 and the division reported an operating loss of £9.6 million. Thereduced revenues were principally a result of the decline in leased linemonitoring and the delay in installation of next-generation assurance solutions.Firm and significant actions were taken in this division in the first half yearto reduce the rate of loss. Performance Analysis Our Performance Analysis division addresses the needs of service providers,equipment manufacturers, large enterprises and government to test the equipmentdeveloped and deployed for telecommunications networks. Our solutions test theperformance, functionality and conformance of telecoms devices. We provideeffective and efficient test and measurement capabilities to meet the needs ofvoice, video, data and mobile testing to reduce risk in deploying new productsin the next-generation fixed line and wireless networks. We achieve this bysimulating real-world conditions in the laboratories of our customers,subjecting the equipment under test to impairment and stress to establish theirtrue capability. The increasing scale and complexity of devices combined withthe necessity to increase the efficiency of our customers' engineers, drivesdemand for more innovative test solutions. Our emphasis on customer support andprofessional services are important differentiators, giving SpirentCommunications a leading reputation in the market and distinct competitiveadvantage. Revenue and operating profit in the Performance Analysis division grew by 1 percent in 2005. We invested £42.1 million, representing 24 per cent of sales (2004£43.2 million and 24 per cent), into product development to increase thecapabilities of our existing products and develop innovative products for launchin 2005 and 2006. The market proved to be volatile and highly competitive during 2005. At theinterim stage we reported that market conditions were variable due to lowerspending by the US government and certain US service providers. As expected thevariable conditions continued through the second half year. As announced in December, revenue for the third quarter was lower thanpreviously expected, although this was partly offset by improved trading in thefourth quarter. We experienced slower demand in 2005 due to activity levels withUS service providers being markedly lower, a result of the impact of mergeractivity in the sector, and the fact that other customers were absorbing thehigh levels of equipment they purchased in 2004. In addition there was a notableslowdown in the demand for ATM test equipment, whilst the US government alsoshifted its spending to other priorities. Finally, some major equipmentmanufacturers continued to work their way through strategic reviews, resultingin further cutting back of their research and development programmes. In contrast, more favourable conditions were seen in the demand for: securitytesting across all market segments, high speed Ethernet devices, Gig E and 10Gig E, requirements for increased scale and the emerging needs for triple play(voice, video, data) testing and video quality testing. The transition of accessand metro networks to Ethernet, saw expansion in demand, particularly in thefirst half year. Wireless infrastructure testing has expanded from functionaltest to performance test, stimulating demand for our products. The emergence ofIMS is also creating new opportunities for Spirent Communications. Despite the strength of demand for Ethernet test equipment aggressive actions bycompetition resulted in some loss of market share in this sector. We haveresponded by establishing a major customer support team, to offer bothadditional services and to launch new leading edge product solutions during thesecond half year. Internally we are progressing our initiatives to increase ourown product development efficiency and effectiveness to improve our productrealisation process. The launch of Spirent TestCenterTM, our unified platformfor Ethernet testing, has resulted in key competitive wins with major existingas well as new customers. Our development plans for Spirent TestCenterTMthroughout the next 18 months will deliver increased functionality, scale, easeof use and automation, making it an industry leading platform. Total revenues from our top 20 customers grew year on year and account forapproximately 40 per cent of revenues; growth rates for a number of theseaccounts exceeded 30 per cent. No one customer represented more than 10 per centof the total divisional revenues. Our revenues by customer type maintained asimilar profile. Sales to network equipment manufacturers represented 49 percent of the total; sales to service providers of 17 per cent; governmentaccounted for 8 per cent (down compared to 2004). The remainder includes chipmanufacturers and enterprise customers. On a geographic basis there was growth in revenue in Europe for all testsolutions, but notably for VoIP, web applications and wireless handset testsystems. The US market was flat, for the reasons described above. Activity inthe Asia Pacific region grew, building on a remarkable growth rate, particularlyin China in 2004. We maintained revenue levels in Japan, despite difficultmarket conditions. We enjoyed strong growth in the Indian market. Our wireless and positioning test products had a record year and sales nowrepresent 27 per cent of the division's turnover. All product lines achievedstrong growth: CDMA, W-CDMA and GPS. We gained market share in the important W-CDMA performance test market and made further strong progress in the sale of GPSemulation systems. Revenues grew in the most important markets in Asia, namelyChina, Korea and Japan and we also made good progress in Europe. We haveestablished and opened wireless service centres in China, Korea, Japan and UK,offering higher levels of customer service and support. We specified, developedand launched a new HSDPA - capable network emulator for the W-CDMA market.Spirent's navigation and positioning test division has been selected to supplykey test equipment to support the joint EU and European Space Agency Galileoproject. Galileo is a major new global navigation system. Spirent is a leader innavigation and positioning test. As we look forward into 2006 and the future, we feel increased confidence thatour Performance Analysis solutions, in the form of new products such as SpirentTestCenter(TM) and our wireless handset test solutions, offer leading edge testcapabilities. We expect to see the benefit from market growth as our customersincrease their investment in latest technologies. 2006 will be a period ofproduct transition as the increased capability of our new products enable us togain market share against a background of continued variable market conditions. Service Assurance Our Service Assurance division is focused on the development of networkmonitoring systems to enable telecom service providers to test and assurebroadband leased line, DSL and IP services. Our products include operations support systems software, remote test probes,network access systems and consulting and technical services. We also supplyportable systems for fault identification and test of copper telephone lines inthe field. Our systems help service providers reduce their operational costs byautomating and centralising their network testing and service assuranceprocesses, reducing the need for expensive engineering intervention andfacilitating faster responses to customers' problems. Our product solutions are based on a solid business case which offers carriersincreased operational efficiencies whilst ensuring the quality of the voice,video and data services they provide. The global telecoms sector continues to migrate from legacy networks towardsIP-based networks and services, which will result in substantial new investment.The shift in carriers' capital expenditure has been slower than expected forservice assurance solutions for the deployment of triple play services. Webelieve that the service assurance market opportunity will develop once thebuild out has taken place and these new services are launched. Following a very tough first six months of 2005, when we reported a fall in thedivision's revenues of over half and an operating loss of £9.0 million, weachieved stability during the second half, having realised the substantial costsavings announced in the first half. We have developed a new strategy for growthto meet the needs of service providers for their new triple play networks andservices. In addition, we have developed a new generation of handheld testequipment, which will enable field test engineers to access the power of thecentral office test and monitoring systems in the field. The revenue profile by customer has remained comparable with 2004, with overhalf of the activity being with US Incumbent Local Exchange Carriers. Theprovision of leased line assurance products accounted for approximately 70 percent of sales throughout the year, whilst the provision of service maintenanceand support accounted for 15 per cent. The second half operating loss of £0.6million reduced significantly from the first half loss of £9.0 million. This was due to higher revenue of £2.4 million, a gross profit improvement from a favourable product mix as we shipped software at higher margins in the second half, and the realisation of cost savings. Sales opportunities for this division were constrained in 2005 partly as aresult of the major acquisitions made by our customers, which has delayed thesourcing of service assurance solutions as they integrated their businesses. Inthe long term, this industry consolidation is likely to be beneficial as we aimto extend our embedded solutions and sell new solutions for triple play, fieldtest and advanced business services into these enlarged customers. In addition,sales decreased due to a rapid shift in technology, whilst customers were notyet ready to install next generation assurance solutions. We were awarded our first triple play contract with TELUS, a major Canadiantelecoms company, our first customer win outside the US for DSL and for advancedbroadband service assurance solutions. We have concentrated on developing new solutions for triple play and advancedbusiness services. Whilst we remain cautious about the timing of the full scaledeployment of advanced services by carriers worldwide, we believe that due tothe actions taken in 2005 we are well placed to serve the market requirements asthey develop. Systems £ million 2005 2004 Change %----------------------------- --------- --------- --------- Revenue 37.7 31.3 20Operating profit 4.4 3.4 29Return on sales (%) 11.7 10.9----------------------------- --------- --------- --------- Figures in the above table relate to PG Drives Technology only. Divestedbusinesses contributed £4.4 million of revenue and £0.6 million of operatingprofit in 2004. The Systems group comprises PG Drives Technology, a leading supplier of controlsystems for electrically powered medical and small industrial vehicles. Revenueand operating profit were up 20 per cent and 29 per cent, respectively. Returnon sales increased to 11.7 per cent compared with 10.9 per cent in 2004. During 2005 we launched two new wheelchair control systems: - the VR2, low cost,mainstream wheelchair control system, and the R-net, a highly sophisticatedwheelchair system, designed for the rehab market that can incorporate a widevariety of input and output devices to suit many different disabilities. Due tothe competitiveness of these systems and of our established VSI, S-Drive andTRIO+ products, we were successful in increasing customer penetration in boththe mobility and industrial vehicles markets during the year. This was achievedin spite of continuing constraints in US government healthcare funding forpowered wheelchairs. We also moved some more of our production to China toreduce the logistical costs of supporting our activities in the Asia Pacificregion. In 2006 we are planning further new product launches that will enable usto strengthen our position in both our addressed markets. Discontinued operations Network Products £ million 2005 2004 Change %----------------------------- --------- --------- --------- Revenue 205.5 187.8 9Operating profit 25.3 21.3 19Return on sales (%) 12.3 11.3----------------------------- --------- --------- --------- Discontinued operations relate to the HellermannTyton Division, comprising theNetwork Products group and the investment in associated companies. We announced in December that we had entered into an agreement to dispose of theHellermannTyton Division to Doughty Hanson and this disposal was completed on15 February 2006. The Network Products group delivered a strong performance in 2005, with revenueof £205.5 million, up 9 per cent compared with 2004. Operating profit of £25.3million was ahead by 19 per cent over 2004, and return on sales improved to 12.3per cent from 11.3 per cent. Organic growth was achieved in all regions and also through the associatedcompany in Japan. The business continued to increase its automotive salesdespite flattening production levels by the European car manufacturers, and toachieve strong growth through its initiatives in North America in automaticapplication systems, particularly in automotive and through the success of itspre-terminated structured cabling system, RapidNet. Profit after tax from discontinued operations was £13.2 million after charging£6.7 million of costs related to the disposal of this business, compared with£17.3 million in 2004. FINANCIAL REVIEW Reporting format The format of the consolidated results for the Spirent Group has beensignificantly altered in this year's report as a result of two factors: firstthe conversion from UK Generally Accepted Accounting Practice ("UK GAAP") toInternational Financial Reporting Standards ("IFRS"); second, thereclassification of the results of the HellermannTyton Division (the NetworkProducts group) to discontinued operations. The table below sets out revenue andoperating profit for the total Group for 2005 and 2004. ----------------- -------- -------- -------- -------- --------£ million First half Second half 2005 2004 Change % 2005 2005----------------- -------- -------- -------- -------- -------- RevenueContinuing 126.5 132.8 259.3 287.2 (10)Discontinued 103.9 101.6 205.5 187.8 9----------------- -------- -------- -------- -------- -------- Total 230.4 234.4 464.8 475.0 (2)----------------- -------- -------- -------- -------- -------- Operating profitContinuing 1.8 9.7 11.5 22.9 (50)Discontinued 12.3 13.0 25.3 21.3 19----------------- -------- -------- -------- -------- -------- Total 14.1 22.7 36.8 44.2 (17)----------------- -------- -------- -------- -------- -------- Return on sales (%)Continuing 1.4 7.3 4.4 8.0Discontinued 11.8 12.8 12.3 11.3----------------- -------- -------- -------- -------- -------- Total 6.1 9.7 7.9 9.3----------------- -------- -------- -------- -------- -------- As our results are reported for the first time in accordance with IFRS,comparative data has been restated. All amounts referred to below relate tocontinuing operations unless otherwise stated. Results Reported revenue from continuing businesses for 2005 of £259.3 million was down10 per cent and operating profit of £11.5 million was down 50 per cent comparedwith 2004. Return on sales for the continuing Group reduced to 4.4 per cent from8.0 per cent in 2004. Revenue by market grew in the Asia Pacific region by 4 per cent but was down inEurope and North America, having been affected by the performance of the ServiceAssurance division in both regions. Operating profit was impacted by the weakness in the Service Assurance divisionin the first half, this division reported a loss of £9.0 million for thatperiod. In the second half year the loss in this division was much reduced to£0.6 million, mainly as a result of the firm actions we took. Revenue andoperating profit in the Performance Analysis division were up 1 per centcompared with 2004. Profitability in the Performance Analysis division wasslightly lower in the third quarter of 2005 recovering somewhat in the fourth.The ongoing business in the Systems group reported good growth in 2005 over2004. Non-segmental costs, which are those that cannot be directly attributed to theoperating segments were £5.3 million excluding material one-time items andshare-based payment (2004 £5.3 million). These costs include the costs of ourBoard, costs in relation to our dual listings and compliance costs, includingthose in relation to the Sarbanes-Oxley Act of 2002. Currency impact In 2005 the effects of currency translation were less marked than in 2004.Currency translation increased revenue from continuing operations by £1.7million, and increased profit before tax, goodwill impairment and materialone-time items by £0.2 million. Cost of sales and operating expenses Product development spend for 2005 was £58.4 million, or 23 per cent of revenue(2004 £63.2 million and 22 per cent respectively). Of this amount £42.1 million(2004 £43.2 million) was spent in the Performance Analysis division and £14.0 million (2004 £17.2 million) in the Service Assurance division. Product development is included in the cost of sales on the income statement. Gross profit decreased to £106.2 million, 41 per cent of sales from £122.0million, 42 per cent of sales in 2004. This was a result of the decrease inrevenue in Service Assurance, the low levels of activity in the first halfresulting in unrecovered manufacturing overheads and to the relative increase inproduct development spending as a percentage of sales as noted above. Administration costs of £74.3 million for 2005 (2004 £34.0 million) include agoodwill impairment charge of £37.0 million made in the first half. A share-based payment charge of £5.1 million has been reported in accordancewith IFRS 2 'Share-based Payment' for the continuing Group. This chargerepresents the expense for share options and other share-based incentivescalculated using an option pricing model. On transition to IFRS Spirent hasapplied IFRS 2 only to awards made after 7 November 2002 and not fully vested at1 January 2005. We anticipate that the charge for 2006 will be in the region of£6 million based on current share price and volatility. Material one-time items of £8.4 million have been charged in 2005 that relate torestructuring costs and inventory write downs within our businesses. Disposal of operations A one-time profit on the disposal of operations of £3.9 million has beenreported, this relates to the sale of certain non trading companies. Finance charges Net interest expense for 2005 was £6.6 million, being £8.1 million cost less£1.5 million income, compared with £6.8 million in 2004 (excluding a make wholeamount in 2004 of £0.5 million). Net interest includes a charge of £1.1 millionin respect of the UK final salary pension scheme in accordance with IAS 19 'Employee Benefits'. The deficit in this scheme has been reduced by the special contribution of £47.0 million in February 2006 and as a result it is estimated that net interest income in respect of the pension scheme will be approximately £1.5 million for 2006. For 2006, and following repayment of the senior loan notes, Spirent expects to earn current market rates of interest on the net cash balance remaining from the disposal of the HellermannTyton Division. (Loss)/profit before tax Reported loss before tax was £41.7 million compared with a profit of £11.2million for 2004. Profit before tax, material one-time items, goodwill impairment, share-basedpayment, profit on disposal of operations and costs associated with the partprepayment of loan notes is set out below: £ million 2005 2004------------------------------- ----------- ----------- Reported (loss)/profit before tax (41.7) 11.2Material one-time items 8.4 2.9Goodwill impairment 37.0 -Share-based payment 5.1 4.8Profit on disposal of operations (3.9) (4.0)Costs associated with the part prepayment of loan notes - 0.5 ------------------------------- ----------- ----------- Adjusted profit before tax 4.9 15.4 ------------------------------- ----------- ----------- Tax There was a tax credit of £4.0 million in 2005 compared with a charge of £2.0million in 2004, due to the release of provisions. We anticipate that theeffective tax rate for 2006 will be approximately 25 per cent. Discontinued operations Discontinued operations contributed profit after tax of £13.2 million comparedwith £17.3 million in 2004. This result is after charging £6.7 million of costsin relation to the disposal that were incurred and expensed during 2005. Earnings per share We are presenting an adjusted earnings per share measure that adds back theeffect of material one-time items, goodwill impairment, share-based payment,profit on the disposal of operations and any related tax as well as prior yeartax adjustments. The adjusted earnings per share measure for the Group as awhole is 2.30 pence for 2005 compared with 3.14 pence in 2004, a decrease of 27 per cent. The weighted average number of shares outstanding at the period endwas 950.4 million (2004 939.2 million). Basic loss per share from continuing operations was 3.97 pence compared with basic earnings per share of 0.98 pence in 2004. Financing and cash flow At 31 December 2005 the Group held cash of £49.2 million compared with £51.7million at 31 December 2004. Borrowings of the continuing Group at the year endwere £75.1 million and borrowings of the discontinued operations were £9.7 million. Total borrowings of the Group at 31 December 2005 were £84.8 million compared with £78.1 million at 31 December 2004. The effect of translation increased borrowings in 2005 by £7.7 million due to the strengthening of the US dollar during the year. Our major borrowings in 2005 continued to be the senior loan notes of $124.8million (£72.6 million) which were repaid in February 2006 out of the proceedsof the sale of the HellermannTyton Division (see post balance sheet eventsbelow). During 2005 our £30 million bank facility remained nil drawn, thisfacility was cancelled in February 2006. Total Group net cash from operating activities for 2005 was down by 49 per centat £29.4 million compared with £57.2 million in 2004 due to the deterioration inService Assurance and absorption of working capital. As reported at the interimstage, working capital increased due to a significant reduction in payables ofabout £12 million, a result of the settlement of liabilities in respect of 2004.For continuing operations there was a cash outflow from operating activities of£1.1 million for the year, this includes £4.0 million in respect ofrestructuring actions (2004 inflow £31.0 million). Free cash flow, being cash flow before disposals, acquisitions and financing for2005 for the Group as a whole was an outflow of £6.8 million compared with aninflow of £23.0 million in 2004. Net capital expenditure increased to £29.9 million, as planned, compared with£24.8 million in 2004. We expect capital expenditure to be much reduced in 2006as the HellermannTyton Division comprised the major part of this. Capitalexpenditure for the continuing Group for 2005 was £14.8 million and we expect itto be around £13 million in 2006. The depreciation charge was £11.4 million for 2005 compared with £14.8 millionin 2004. We expect the charge for 2006 to be in the region of £13 million. Net tax payments for the Group of £4.6 million were made in 2005 compared with£3.1 million in 2004. We have, and expect to continue to benefit from theutilisation of carried forward tax losses in the UK and the US. We expect taxpayments for 2006 to be approximately £4 million. In 2005 we made our second additional annual cash contribution of £3.5 millionto our final salary UK pension scheme. The Company is not expected to make afurther such payment in 2006 having instead made a special contribution of £47.0million out of the proceeds of the sale of the HellermannTyton Division inFebruary 2006. Net interest payments of £6.5 million in 2005 were below the £7.2 million paidin 2004. In addition in 2004 we paid make whole amounts of £2.3 million. Pension fund At the end of 2005 the deficit in the UK final salary pension scheme under IAS19 'Employee Benefits' had increased to £51.5 million (31 December 2004 £38.1million). The assets have grown during the year by £21.9 million as a result ofthe positive performance of equity markets and additional Company contributionsmade. However, the liabilities have grown by £35.3 million due to falling bondrates together with changes in longevity assumptions. In February 2006 theCompany made a special contribution of £47.0 million into the UK final salarypension scheme as had been announced in December 2005. We have reassessed the recognition of the deferred tax asset in relation to thepension scheme. The funding of the scheme will crystallise a tax loss in 2006that may not be recoverable in the foreseeable future as the Company hassignificant accumulated tax losses in the UK. Consequently, the deferred taxasset of £11.1 million, which had been recognised at 31 December 2004, has beenwritten off through reserves. Dividend No dividend is being declared in respect of 2005. Post balance sheet events On 23 January 2006 Spirent announced that it had entered into an agreement toacquire SwissQual Holding AG ("SwissQual") for an initial consideration of CHF62.5 million (£27.7 million). The initial consideration was paid in cash oncompletion on 23 January 2006 out of cash resources and utilisation of a newbank facility that was set up specifically for the purpose. A further CHF 28.0million (£12.4 million) is payable in 2007 depending on revenue growth andvarious technical milestones. We also announced on 13 February 2006 the acquisition of QuadTex for US$7.5million (£4.2 million), payable in cash on completion with a further US$1.5million (£0.9 million) payable depending on certain technical milestones and theretention of key employees. The disposal of the HellermannTyton Division was completed on 15 February 2006when proceeds of £288.9 million (for a cash free/debt free equivalent value)were received. These proceeds have been applied as follows: • Repayment of the senior loan notes of $124.8 million (£71.5 million) • Payment of the make whole amount (an amount which becomes payable on the early redemption of the senior loan notes) of $12.9 million (£7.4 million) • Break fees of £2.3 million in respect of interest rate swaps taken out in connection with the senior loan notes • Special contribution of £47.0 million to the UK final salary pension scheme • Repayment and cancellation of the bank facility in connection with the acquisition of SwissQual Taking these transactions into account the pro forma cash balance isapproximately £150 million, of this, up to £50 million has been earmarked tofund the on-market share repurchase programme. The programme is expected tobegin in the second quarter, following the completion of certain actions:establishing distributable reserves in the parent Company, clearance from thePension Regulator and the approval from shareholders to make on-market sharerepurchases of up to 14.99 per cent of our issued share capital. Following the disposal of the HellermannTyton Division the Company issuednotices of cancellation in respect of all its borrowing facilities. Adoption of International Financial Reporting Standards Spirent has applied International Financial Reporting Standards ("IFRS"), asadopted by the European Union, for the first time with effect from 1 January2005. The effect of the transition to IFRS on the financial information nowbeing presented, including restatement of comparatives and the accountingpolicies adopted, has not materially changed from the information provided inthe document issued by Spirent on 15 July 2005 and entitled "Transition toInternational Financial Reporting Standards". The most significant impacts have been in relation to: • The elimination of the charge for goodwill amortisation • The change in the profit or loss on the disposal of operations; and • An increase in the charge for share-based payment Overall, this has had a net beneficial effect on Spirent's historic reported earnings for 2003 and 2004, however the adoption of IFRS has no impact on the cash generation of the Group. Consolidated income statement Year to 31 December -------------------£ million Note 2005 2004------------------------------ ------ --------- --------- Continuing operationsRevenue 2,3 259.3 287.2Cost of sales (153.1) (165.2)------------------------------ ------ --------- --------- Gross profit 106.2 122.0Selling and distribution (70.9) (73.0)Administration (74.3) (34.0)Other operating income - 0.2------------------------------ ------ --------- --------- Operating (loss)/profit 2 (39.0) 15.2------------------------------ ------ --------- --------- Add back:Material one-time items 8.4 2.9Goodwill impairment 37.0 -Share-based payment 5.1 4.8Operating profit before material one-time items, goodwillimpairment and share-based payment 2 11.5 22.9------------------------------ ------ --------- --------- Loss from interest in joint venture - (0.7)------------------------------ ------ --------- --------- Operating (loss)/profit of the Group and joint venture (39.0) 14.5Profit on the disposal of operations 3.9 4.0------------------------------ ------ --------- --------- (Loss)/profit before interest (35.1) 18.5Finance income 1.5 1.4Finance costs (8.1) (8.2)Costs associated with the part prepayment of loan notes - (0.5)------------------------------ ------ --------- --------- (Loss)/profit before tax (41.7) 11.2Tax 4.0 (2.0)------------------------------ ------ --------- --------- (Loss)/profit for the year from continuing operationsafter tax (37.7) 9.2Discontinued operationsProfit for the year from discontinued operations 13.2 17.3------------------------------ ------ --------- --------- (Loss)/profit for the year (24.5) 26.5------------------------------ ------ --------- --------- Attributable toEquity holders of parent (24.9) 26.2Minority shareholders' interests - discontinued operations 0.4 0.3------------------------------ ------ --------- --------- (Loss)/profit for the year (24.5) 26.5------------------------------ ------ --------- --------- (Loss)/earnings per share 4Basic (loss)/earnings (pence) (2.62) 2.79Basic (loss)/earnings from continuing operations (pence) (3.97) 0.98Diluted (loss)/earnings (pence) (2.62) 2.74Diluted (loss)/earnings from continuing operations (pence) (3.97) 0.96------------------------------ ------ --------- --------- Consolidated statement of recognised income and expense Year to 31 December ---------------------£ million 2005 2004---------------------------------- --------- --------- Income and expense recognised directly in equityGains on cash flow hedges taken to equity 1.9 -Exchange differences on retranslation of foreignoperations 4.1 (1.5)Actuarial (losses)/gains on defined benefit pensionplans (16.1) 3.0---------------------------------- --------- --------- (10.1) 1.5Transfers to income statementGains on cash flow hedges (0.5) -Transfers to balance sheetDeferred tax asset on pension liability (11.1) -Tax on actuarial gains - (0.9)---------------------------------- --------- --------- Net (expense)/income recognised directly in equity (21.7) 0.6(Loss)/profit for the year (24.5) 26.5---------------------------------- --------- --------- Total recognised income and expense for the year (46.2) 27.1---------------------------------- --------- --------- Attributable toEquity holders of parent (46.8) 26.9Minority shareholders' interests - discontinuedoperations 0.6 0.2---------------------------------- --------- --------- (46.2) 27.1---------------------------------- --------- --------- Effects of changes in accounting policyEquity holders of parentNet gain on cash flow hedges on first-time applicationof IAS 39 0.5 -Net loss on fair value hedges on first-time applicationof IAS 39 (1.0) -Loan notes at fair value on first-time application ofIAS 39 0.4 ----------------------------------- --------- --------- (0.1) ----------------------------------- --------- --------- Consolidated balance sheet At 31 December ---------------------£ million 2005 2004---------------------------------- --------- --------- AssetsNon current assetsGoodwill 71.5 106.5Property, plant and equipment 30.1 86.3Investment in associates - 14.3Trade and other receivables 1.7 1.5Deferred tax 1.0 11.1---------------------------------- --------- --------- 104.3 219.7---------------------------------- --------- --------- Current assetsInventories 27.0 54.0Trade and other receivables 56.3 88.4Derivative financial instruments 2.6 -Cash and cash equivalents 49.2 51.7---------------------------------- --------- --------- 135.1 194.1---------------------------------- --------- --------- Assets held in disposal group held for sale 164.1 ----------------------------------- --------- --------- Total assets 403.5 413.8---------------------------------- --------- --------- LiabilitiesCurrent liabilitiesTrade and other payables (62.9) (90.8)Current tax (24.7) (26.2)Derivative financial instruments (0.7) -Short term borrowings and overdrafts (3.9) (1.8)Provisions and other liabilities (4.1) (4.2)---------------------------------- --------- --------- (96.3) (123.0)---------------------------------- --------- --------- Non current liabilitiesTrade and other payables (0.7) (3.9)Derivative financial instruments (2.0) -Long term borrowings (71.2) (76.3)Defined benefit pension plan deficit (51.5) (38.1)Deferred tax (0.8) (2.5)Provisions and other liabilities (10.1) (9.6)---------------------------------- --------- --------- (136.3) (130.4)---------------------------------- --------- --------- Liabilities included in disposal group held for sale (48.7) ----------------------------------- --------- --------- Total liabilities (281.3) (253.4)---------------------------------- --------- --------- Net assets 122.2 160.4---------------------------------- --------- --------- Capital and reservesShare capital 32.2 31.9Share premium account 4.4 1.3Capital reserve 10.2 10.9Translation reserve 5.5 1.6Net unrealised gains and losses 1.9 -Retained earnings 66.1 113.4---------------------------------- --------- --------- Equity holders of parent 120.3 159.1Minority interests 1.9 1.3---------------------------------- --------- --------- Total equity 122.2 160.4---------------------------------- --------- --------- Consolidated cash flow statement Year to 31 December -------------------£ million Note 2005 2004------------------------------ ------ --------- --------- Cash flows from operating activitiesCash generated from operations 5 34.0 60.3Tax paid (4.6) (3.1)------------------------------ ------ --------- --------- Net cash from operating activities 29.4 57.2------------------------------ ------ --------- --------- Cash flows from investing activitiesDividends received from associates 0.2 0.1Interest received 1.4 1.6Disposal of operations 2.4 2.5Purchase of property, plant and equipment (30.5) (25.3)Proceeds from the sale of property, plant andequipment 0.6 0.5Acquisition of subsidiaries - (1.1)Contribution to joint venture - (0.2)------------------------------ ------ --------- --------- Net cash used in investing activities (25.9) (21.9)------------------------------ ------ --------- --------- Cash flows from financing activitiesInterest paid (7.4) (8.4)Interest element of finance lease rental payments (0.5) (0.4)Costs associated with the part prepayment of loannotes - (2.3)Proceeds from the issue of share capital 2.7 1.5Repayments of borrowings (0.2) (10.2)Repayments of capital element of finance leaserentals (1.4) (0.8)------------------------------ ------ --------- --------- Net cash used in financing activities (6.8) (20.6)------------------------------ ------ --------- --------- Net (decrease)/increase in cash and cash equivalents (3.3) 14.7Cash and cash equivalents at the beginning of theyear 51.0 36.9Effect of foreign exchange rate changes 1.1 (0.6)------------------------------ ------ --------- --------- Cash and cash equivalents at the end of the year 48.8 51.0------------------------------ ------ --------- --------- Cash and cash equivalents comprise:Cash and cash equivalents 49.2 51.7Overdrafts (0.4) (0.7)------------------------------ ------ --------- --------- 48.8 51.0------------------------------ ------ --------- --------- Notes 1 Financial information presented The financial information contained in this document does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. The financial statements for the year to 31 December 2004 were prepared inaccordance with UK Generally Accepted Accounting Practice ("UK GAAP"). Thesefinancial statements, upon which the auditors issued an unqualified opinion,have been delivered to the Registrar of Companies. As required by the European Union's IAS Regulation and the Companies Act 1985the Group has prepared its consolidated financial statements for the year to 31December 2005 in accordance with International Financial Reporting Standards("IFRS") as adopted by the European Union. This is the first year in which theGroup has prepared its financial statements under IFRS and the comparatives havebeen restated from UK GAAP to comply with IFRS. The effect of the transition to IFRS on the financial information now beingpresented, including restatement of comparatives and the accounting policiesadopted, has not materially changed from the information provided in thedocument issued by Spirent on 15 July 2005 and entitled "Transition toInternational Financial Reporting Standards". 2 Segmental analysis ------------ -------- ------- ---------- ------ ------- ------- -------- -------£ million Performance Service Communications Systems Non Continuing Discontinued Total Analysis Assurance segmental operations operation operations Network Total Products------------ -------- ------- ---------- ------- ------- ------- -------- -------2005Revenue 178.8 42.8 221.6 37.7 - 259.3 205.5 464.8------------ -------- ------- ---------- ------- ------- ------- -------- ------- Operatingprofit/(loss)before materialone-time items,goodwillimpairment andshare-basedpayment 22.0 (9.6) 12.4 4.4 (5.3) 11.5 25.3 36.8Materialone-time items (2.5) (5.4) (7.9) - (0.5) (8.4) (0.4) (8.8)Goodwillimpairment - (37.0) (37.0) - - (37.0) - (37.0)Share-basedpayment (3.6) (1.2) (4.8) (0.1) (0.2) (5.1) (0.5) (5.6) ------------ -------- ------- ---------- ------- ------- ------- -------- ------- Operating(loss)/profit 15.9 (53.2) (37.3) 4.3 (6.0) (39.0) 24.4 (14.6)Share ofprofit ofassociates - - - - - - 2.7 2.7 ------------ -------- ------- ---------- ------- ------- ------- -------- ------- Operating(loss)/profitof the Groupand associates 15.9 (53.2) (37.3) 4.3 (6.0) (39.0) 27.1 (11.9)Profit ondisposal ofoperations 3.9 (6.7) (2.8)Finance income 1.5 0.1 1.6Finance costs (8.1) (1.2) (9.3) ------------ -------- ------- ---------- ------- ------- ------- -------- ------- (Loss)/profitbefore tax (41.7) 19.3 (22.4)Tax 4.0 (6.1) (2.1) ------------ -------- ------- ---------- ------- ------- ------- -------- ------- (Loss)/profitafter tax forthe year (37.7) 13.2 (24.5) ------------ -------- ------- ---------- ------- ------- ------- -------- ------- 2 Segmental analysis cont. ------------ -------- ------- --------- ------ ------- ------- ------- -------£ million Performance Service Communications Systems Non Continuing Discontinued Total Analysis Assurance segmental operations operation operations Network Total Products ------------ -------- ------- --------- ------ ------- ------- ------- -------2004Revenue 176.8 74.7 251.5 35.7 - 287.2 187.8 475.0------------ -------- ------- --------- ------ ------- ------- ------- ------- Operatingprofit beforematerialone-time items andshare-basedpayment 21.7 2.5 24.2 4.0 (5.3) 22.9 21.3 44.2Materialone-time items 1.3 (1.9) (0.6) - (2.3) (2.9) - (2.9)Share-basedpayment (3.2) (1.4) (4.6) (0.1) (0.1) (4.8) (0.4) (5.2) ------------ -------- ------- --------- ------ ------- ------- ------- ------- Operatingprofit/ (loss) 19.8 (0.8) 19.0 3.9 (7.7) 15.2 20.9 36.1Loss frominterest injoint venture - (0.7) (0.7) - - (0.7) - (0.7)Share ofprofit ofassociates - - - - - - 1.8 1.8 ------------ -------- ------- --------- ------ ------- ------- ------- ------- Operatingprofit/(loss)of the Group,joint ventureand associates 19.8 (1.5) 18.3 3.9 (7.7) 14.5 22.7 37.2Profit on thedisposal ofoperations 4.0 - 4.0Finance income 1.4 0.2 1.6Finance costs (8.2) (0.9) (9.1)Costsassociatedwith the partpre-payment ofloan notes (0.5) - (0.5) ------------ -------- ------- --------- ------ ------- ------- ------- ------- Profit beforetax 11.2 22.0 33.2Tax (2.0) (4.7) (6.7) ------------ -------- ------- --------- ------ ------- ------- ------- ------- Profit aftertax for theyear 9.2 17.3 26.5 ------------ -------- ------- --------- ------ ------- ------- ------- ------- 3 Geographical analysis £ million 2005 2004---------------------------------- --------- --------- Revenue by marketContinuing operationsEurope 43.0 49.3North America 158.2 182.0Asia Pacific, Rest of Americas, Africa 58.1 55.9---------------------------------- --------- --------- 259.3 287.2---------------------------------- --------- --------- Discontinued operationsEurope 122.8 118.1North America 42.0 35.0Asia Pacific, Rest of Americas, Africa 40.7 34.7---------------------------------- --------- --------- 205.5 187.8---------------------------------- --------- --------- 464.8 475.0---------------------------------- --------- --------- Revenue by sourceContinuing operationsEurope 61.2 59.9North America 180.9 209.7Asia Pacific, Rest of Americas, Africa 17.2 17.6---------------------------------- --------- --------- 259.3 287.2---------------------------------- --------- --------- Discontinued operationsEurope 131.0 125.0North America 40.3 33.7Asia Pacific, Rest of Americas, Africa 34.2 29.1---------------------------------- --------- --------- 205.5 187.8---------------------------------- --------- --------- 464.8 475.0---------------------------------- --------- --------- 4 (Loss)/earnings per share £ million Continuing Discontinued Total operations operations operations---------------------------- ---------- ------------ ---------- 2005(Loss)/profit for the year (37.7) 13.2 (24.5)Less: minority shareholders'interests - (0.4) (0.4)---------------------------- ---------- ------------ ---------- (Loss)/profit for the yearattributable to equityholders of parent (37.7) 12.8 (24.9)Material one-time items 8.4 0.4 8.8Goodwill impairment 37.0 - 37.0Share-based payment 5.1 0.5 5.6Profit on the disposal ofoperations (3.9) 6.7 2.8Prior year tax credit (5.9) - (5.9)Prior year tax credit onassociate - (1.5) (1.5)---------------------------- ---------- ------------ ---------- Adjusted earnings attributableto equity holders of parent 3.0 18.9 21.9---------------------------- ---------- ------------ ---------- 2004Profit for the year 9.2 17.3 26.5Less: minority shareholders'interests - (0.3) (0.3)---------------------------- ---------- ------------ ---------- Profit for the yearattributable to equityholders of parent 9.2 17.0 26.2Material one-time items 2.9 - 2.9Share-based payment 4.8 0.4 5.2Profit on the disposal ofoperations (4.0) - (4.0)Costs associated with the part prepayment of loan notes 0.5 - 0.5Prior year tax credit (1.3) - (1.3)---------------------------- ---------- ------------ ---------- Adjusted earningsattributable to equityholders of parent 12.1 17.4 29.5---------------------------- ---------- ------------ ---------- 2005 2004---------------------------- ---------- ------------ ---------- (Loss)/earnings per share (pence) Basic (2.62) 2.79Basic from continuingoperations (3.97) 0.98 Diluted (2.62) 2.74Diluted from continuingoperations (3.97) 0.96 Adjusted 2.30 3.14Adjusted from continuingoperations 0.32 1.29---------------------------- ---------- ------------ ---------- Weighted average number of sharesin issue (million)Basic and adjusted 950.4 939.2Dilutive potential ofemployee share options 10.2 18.1---------------------------- ---------- ------------ ---------- Weighted average number of shares in issue -diluted 960.6 957.3---------------------------- ---------- ------------ ---------- 5 Reconciliation of operating (loss)/profit to cash generated from operations £ million 2005 2004---------------------------------- --------- --------- Continuing operationsOperating (loss)/profit (39.0) 15.2Adjustments for:Goodwill impairment 37.0 -Depreciation of property, plant and equipment 11.4 14.8Loss on the disposal of property, plant and equipment 0.1 0.5Impairment of property, plant and equipment - 0.6Share-based payment 5.1 4.8Changes in working capital:Deferred income received 5.8 4.9Decrease/(increase) in receivables 0.4 (7.1)(Increase)/decrease in inventories (0.4) 3.5(Decrease)/increase in payables (16.8) 4.5Decrease in provisions (0.9) (2.9)Defined benefit pension plan (3.8) (7.8)---------------------------------- --------- --------- Cash (outflow)/generated from continuing operations (1.1) 31.0---------------------------------- --------- --------- Discontinued operationsOperating profit 24.4 20.9Adjustments for:Depreciation of property, plant and equipment 11.2 10.6Profit on the disposal of property, plant and equipment (0.1) (0.1)Share-based payment 0.5 0.4Changes in working capital:Increase in receivables (1.7) (2.0)Increase in inventories (3.0) (4.5)Increase in payables 3.8 4.0---------------------------------- --------- --------- Cash generated from discontinued operations 35.1 29.3---------------------------------- --------- --------- Cash generated from operations 34.0 60.3---------------------------------- --------- --------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Spirent