Final Results

RNS Number : 3376I

Laird PLC

10 March 2010

 

10 March 2010

 

LAIRD PLC

AUDITED RESULTS

FOR THE YEAR TO 31 DECEMBER 2009

 

	2009	2008
	£m	£m
Revenue from continuing operations	528.8	635.3
Underlying profit before tax from continuing operations (i)	26.5	60.6
Profit before tax from continuing operations	4.6	26.5
Operating cash flow from continuing operations	49.7	48.1
Net borrowings	45.4	139.5
Shareholders' funds	579.6	585.3
	p/share*	p/share*
Underlying earnings from continuing operations(i)	9.6	23.8
Basic earnings from continuing operations	(0.8)	7.0
Dividend	6.0	10.31

 

Peter Hill, Chief Executive, said:

 

"Trading conditions proved to be very challenging in 2009 and against this background we took decisive actions to reduce costs and align our operations to the market environment. We also strengthened Laird's balance sheet in the light of the uncertain conditions and the limited visibility of customer demand.

 

By the end of 2009 we had seen some recovery in a number of our markets and this, together with the benefits of our cost reductions, led to a significant improvement in underlying profits and operating margin in the second half of 2009. Operating cash conversion was particularly strong in the year.

 

While the profile of an economic recovery remains uncertain, we have so far in 2010 seen a continuation of the trends experienced in the second half of 2009. We have a sound financial structure, and we retain leading positions in the majority of our markets. We believe that the fundamentals of our markets remain attractive, and that we are well placed to capitalise on opportunities as these markets return to growth."

 

 

Summary

 

·;	Results impacted by the global economic downturn and associated destocking in the global supply chain, but aggressive actions taken to reduce costs and reposition the business.
·;	Revenue for the year of £528.8 million, down 17% (down 30% in US Dollars).
·;	Sequential recovery in revenues in the second half of 2009, compared with the first half, in our Performance Materials and Wireless Systems divisions, although visibility of customer demand remained limited. Customer base being successfully expanded in the Handset Products division.
·;	Aggressive actions taken to reduce costs:
	-	Direct labour costs reduced by 30%, in line with revenues.
	-	Total overheads reduced by $72 million (£45.9 million) in the year compared with 2008.
·;	Underlying operating profit of £33.6 million, down 51%. Strong improvement in profit in the second half of 2009 (£22.2 million) compared with the first half (£11.4 million). Underlying operating profit margin 8.5% in the second half of 2009, compared with 4.3% in the first half.
·;	Underlying profit before tax for the year of £26.5 million (2008: £60.6 million).
·;	Continued investment in technology and Research & Development:
	-	£42.8 million (2008: £39.0 million).
	-	Research & Development as percentage of sales 8.1% (2008: 6.1%).
·;	Focus on cash generation: operating cash flow, after capital expenditure, for the year of £49.7 million (2008: £48.1 million). Operating cash conversion 148% (2008: 70%).
·;	Sound financial structure, benefitting from the Rights Issue proceeds and strong cash generation: net borrowings at year end £45.4 million (2008: £139.5 million).
·;	Full year dividend of 6.0 pence (2008: 10.31 pence*), a level which allows funding of growth opportunities while pursuing a progressive dividend policy.

 

 

Explanatory notes:

 

i)	Laird uses underlying results as key performance indicators. Underlying profit before tax and underlying earnings per share are stated before exceptional items, the amortisation of acquired intangible assets, deferred tax on acquired intangible assets and goodwill, the gain or loss on disposal of businesses, the impact arising from the fair valuing of financial instruments, and acquisition transaction costs. The narrative that follows is based on underlying operating profit, profit before tax and earnings per share, as the directors believe that these provide a more consistent measure of operating performance.
*	The weighted average number of shares used to calculate earnings per share was 211.6 million in 2009 and 204.3 million in 2008, following the Rights Issue announced in October 2009. 2008 earnings and dividends per share have been restated for the effect of the Rights Issue.

 

 

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

 

 

OVERVIEW

 

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

 

In 2009 we experienced a sustained upheaval in the global economy, with its associated credit pressures, reductions in consumer spending and currency volatility, all of which impacted our global electronics markets. We were also impacted by destocking in our global supply chain, the effect of market share loss by certain key customers in their end user markets, bankruptcy filings in the automotive sector, and the loss of market share with a key customer in our Handset Products division as they changed their sourcing strategy. Trading conditions were challenging, and visibility of customer demand was limited and volatile.

 

Against that background, we rapidly implemented an extensive programme of restructuring and cost reductions and strengthened our balance sheet, repositioning our business to operate successfully in the changed economic and market environment. We continued to invest in enhancing our technical and operational capabilities, which has allowed us to increase our penetration with a number of key customers as well as expanding our customer base itself.

 

RESULTS

 

Revenue from continuing operations in 2009 was £528.8 million, down 17% (2008: £635.3 million). Revenues in US Dollars declined 30% in the year. Compared to the first half, revenues in the second half of 2009 were broadly flat on those in the first half expressed in Sterling, but were up 8% in US Dollars. We saw good revenue growth in the second half of the year in our Performance Materials and Wireless Systems divisions, while revenues in our Handset Products division declined, compared with first half of 2009.

 

We took swift and aggressive actions during the year to reduce our cost base in response to the economic downturn, flexing direct labour costs, consolidating facilities and reducing direct overheads and Selling, General & Administration ("SG&A") costs, while largely maintaining our investment in engineering and research & development ("R&D"). Our objective has been to protect profitability during the downturn, while retaining our capabilities and our ability to respond rapidly to a market recovery.

 

In 2009, we reduced our direct labour costs in US Dollars by 30% compared with 2008, in line with the fall in revenues. Total overheads in 2009, including direct overheads, SG&A costs and R&D, were $72 million (£45.9 million) lower than in 2008, as a result of the actions we had taken.

 

Underlying operating profit from continuing operations was £33.6 million in 2009, down 51% (2008: £68.5 million). Operating margin was 6.4%, down from 10.8% in 2008. However, the operating profit of £22.2 million in the second half of 2009 grew strongly compared with the £11.4 million in the first half. Underlying operating margin in the second half of the year was 8.5% (8.8% in the fourth quarter), compared well with the 4.3% in the first half.

Underlying profit before tax from continuing operations was £26.5 million in 2009, down 56% (2008: £60.6 million). However, underlying pre tax profit in the second half of 2009, at £18.9 million, was more than double the £7.6 million in the first half of the year.

 

The restructuring actions taken, including headcount reductions and the consolidation of manufacturing facilities, resulted in exceptional costs from continuing operations of £10.2 million in the year, with a cash spend of £3.4 million. There was an additional cash spend on exceptional items of £8.6 million in 2009, resulting from exceptional charges incurred in 2008.

 

Statutory profit before tax from continuing operations in 2009, after exceptional items, the amortisation of acquired intangibles, the gain or loss on the disposal of businesses and the fair valuing of financial instruments, was £4.6 million (2008: £26.5 million).

 

We focused strongly on cash generation in 2009, reducing working capital significantly and curtailing capital expenditure. Operating cash flow after capital expenditure from continuing operations was £49.7 million (2008: £48.1 million). Cash conversion after capital expenditure was 148% (2008: 70%).

 

Net borrowings at 31 December 2009 were £45.4 million (2008: £139.5 million), with the reduction due largely to the receipt of proceeds from the Rights Issue announced in October 2009 together with the strong cash conversion of profits.

 

Underlying earnings per share from continuing operations were 9.6 pence (2008: 23.8 pence), reflecting the lower profits and, as expected, a higher tax rate.

 

DIVIDEND

 

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

 

The Board believes that a 2009 full year dividend of 6.0 pence per share (2008: 10.31 pence), is at a level which allows funding of growth opportunities while pursuing a progressive dividend policy. The Board is, accordingly, recommending a final dividend of 2.53 pence per share (2008: 6.84 pence).

 

STRATEGIC DEVELOPMENT

 

Laird has built or acquired a number of leading positions in its core markets with a broad range of proprietary products and strong customer relationships. We specialise in providing products and solutions for our customers that allow their own electronic devices to operate efficiently and cost effectively.

 

Through investment in technology leadership, we seek to strengthen our positions in our core markets, to broaden our customer base, and to increase our penetration with our customers. We saw benefits from this investment in 2009 in terms of new customer and programme wins, with further gains expected in 2010 and 2011.

 

We continue to enhance our competitive edge by repositioning manufacturing, engineering and support functions to lower cost locations, while maintaining the highest levels of customer support. Approximately 90% of our revenues by manufactured origin in 2009 were from lower cost countries. We seek to be the "employer of choice" in these locations, recognising that competition for labour will continue to increase.

 

We believe that we are well positioned geographically, particularly in our ability to serve the growing Asian economies, and in markets with attractive fundamentals. For example, a leading industry commentator, iSuppli is projecting a compound annual growth rate ("CAGR") of 9% a year, from 2009 to 2012, for mobile device unit shipments, with growth driven in product terms by "smartphones" and geographically in Asia, Eastern Europe, the Middle East and Africa. They are also forecasting strong growth in embedded telematics, including satellite radio, with a CAGR of 24% a year from 2009 to 2012.

 

PC notebooks and netbooks are expected to be another area of growth, with Gartner projecting a CAGR of 21% a year, from 2009 to 2012, in unit shipments, while mobile network infrastructure spend is projected to be maintained, with growth in infrastructure for 3G, 3.5G and 4G / LTE more than offsetting a decline in 2G.

 

Other areas projected by iSuppli to show strong growth are LCD flat screen displays (2009 - 2012 CAGR of 16% a year), and Machine to Machine ("M2M") wireless modules (2009 - 2012 CAGR 44% a year). Strong growth is also projected in both wireless broadband and cellular wireless adoption across a broad range of consumer electronics (including gaming devices, book readers, portable navigation devices, and broadband PC applications) with a CAGR in unit shipments of 23% a year.

 

In the medium term we also believe that opportunities exist in a number of new emerging growth markets, where we currently have little presence but where we are now researching the opportunities for the application of both our existing, and potential new, components and systems.

 

PERFORMANCE MATERIALS DIVISION

 

Year ended 31 December	2009 (£'m)			2008
	H1	H2	Year	(£'m)
Revenue	86.3	95.6	181.9	190.9
Underlying operating profit	4.8	14.2	19.0	23.1
Return on sales	5.6%	14.9%	10.4%	12.1%

 

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

 

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

 

Divisional revenues decreased by 5% in 2009 to £181.9 million, with the year-on-year decline in revenues in US Dollars being 19%. However, we saw an encouraging recovery in the second half of 2009, with divisional revenues up 21% in US Dollars compared with the first half. Divisional revenues grew progressively quarter by quarter during the year.

 

The majority, 63%, of the divisional revenues in 2009 were from EMI shielding materials, with 27% from our thermal management solutions and 10% from our signal integrity products.

 

By market segment, 52%, of the division's revenues in 2009 were to the IT, telecommunications and datacom sectors, with the balance to the consumer electronics, industrial and instrumentation, medical, and aerospace and defence markets.

 

2009 was a record year for revenues from our thermal management product lines, despite the overall economic downturn. We benefitted from new product introductions, and saw growth in revenues into the telecom and datacom infrastructure markets and notebook PCs, as well as into the LED lighting, medical and aerospace sectors.

 

Revenues in our EMI product lines declined overall compared with 2008. From a low point in the second quarter of 2009, we have seen progressive growth during the second half, particularly into PC notebooks, telecom and datacom, portable location devices and aerospace.

 

Revenues in our signal integrity product lines fell sharply in the first half of 2009 compared with 2008, as a result of excess industry capacity caused by reduced customer demand. During the year we began to see the benefits of a re-engineering of our product lines and we expanded and strengthened our sales force for these products, regaining market share and broadening our customer base, with the result that revenues in the second half of the year grew strongly compared with the first half.

 

Underlying operating profit in the division fell 18% in the year to £19.0 million (2008: £23.1 million), and return on sales fell from 12.1% in 2008 to 10.4% in 2009. However, underlying operating profit recovered well in the second half of 2009 compared with first half, as a result of higher revenues and the benefit of cost reductions; return on sales in the second half increased to 14.9% compared with 5.6% in the first half.

 

We successfully launched a number of new products during 2009, resulting in market share gains, greater penetration at existing customers, and a broadening of the customer base.

 

We introduced a new range of cooling products, with thermoelectric assemblies offering a more compact design and enhanced thermal module performance, as well as new thermally conductive printed circuit board products, initially for the LED lighting market.

 

We also developed softer and thinner "fabric over foam" shielding materials, providing customers with a lighter and more versatile solution without any loss of performance. Our new EMI Sentry™ family of EMI form in place gaskets offers greater adhesion, strength and reliability that is ideal for base stations and portable devices, as well as for the consumer electronics industry more generally. A number of new EMI elastomer products were also introduced, underpinning our growth in the telecom and datacom infrastructure markets.

 

The re-engineering of our signal integrity products has resulted in the launch of new families of ferrite cores, and chip beads for use with printed circuit boards, and these have been instrumental in the recovery in revenues seen in the second half.

 

Operationally, we have continued the progressive relocation of the majority of our remaining North American manufacturing in this division to Asia, and are also strengthening our design and engineering capabilities in Asia, where the majority of the division's customers are now located.

 

The higher power, speed and performance of electronic devices are expected to underpin demand for our Performance Materials division's products. We saw a recovery in both revenues and profits in this division in the second half of 2009, and have strengthened its capabilities and enhanced its competitiveness. We currently expect this recovery to continue into 2010.

 

HANDSET PRODUCTS DIVISION

 

Year ended 31 December	2009 (£'m)			2008
	H1	H2	Year	(£'m)
Revenue	142.4	119.6	262.0	348.7
Underlying operating profit	6.3	5.4	11.7	37.4
Return on sales	4.4%	4.5%	4.5%	10.7%

 

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

 

Divisional revenues decreased 25% in 2009 to £262.0 million (2008: £348.7 million); in US Dollars, the year-on-year decline was 36%.

 

The majority, 63%, of divisional revenues in 2009 were cellular and complementary antennae products, with 19% from actuation mechanisms and 18% from handset metals, including BLS.

 

Revenues in the division in the second half of 2009 declined by 7% in US Dollars compared with the first half of the year. Revenues in our antennae and handset metals product lines showed quarter on quarter growth in the fourth quarter, although this trend was not seen in actuation mechanisms, where fourth quarter revenues declined significantly.

 

As previously highlighted, we have lost market share in the actuation mechanisms and handset metals product lines as a result of a progressive shift in the sourcing policy of a major customer, in favour of large contract manufacturers.

 

In handset metals we have been successful in broadening our customer base, particularly in the "smartphone" segment. These new revenues are largely offsetting the impact of the major customer's change in sourcing policy.

 

In actuation mechanisms new programme awards are, as expected, taking longer to come through, leading to a short term decline in overall revenues from this product line.

 

In our cellular and complementary antennae area, the benefits of increasing unit volumes during the second half of 2009 were offset by lower average selling prices, both as a result of changes in the product "mix" of antennae and customer price-downs. However, we also saw a temporary decline in our antennae market share in the fourth quarter, as programmes on which we were single sourced in the ramp up phase were moved by a major customer to being dual sourced.

 

We currently expect the revenue trends in our product lines described above to continue into the first half of 2010, before recovering in the second half.

 

The division's underlying operating profit fell 69% in the year to £11.7 million (2008: £37.4 million), and return on sales fell from 10.7% in 2008 to 4.5% in 2009.

 

Our customers now include all of the "top five" global Original Equipment Manufacturers ("OEMs"), and we are winning increasing amounts of new business from the emerging North American players in the "smartphone" segment. We are also consolidating our presence with Asian Original Design Manufacturers ("ODMs") and OEMs.

 

We retain a strong technical and operational capability in handset metals (including the emerging segment of visual metals) and actuation mechanisms, and are increasing our penetration with a number of the "top 5" OEMs as well as broadening our customer base more generally.

 

In cellular and complementary antennae we believe, based on customer feedback, that we hold the industry technology leadership position. A major OEM customer has confirmed to us that we hold this position with them, relative to their other suppliers.

 

We were very active in new product development during 2009, which will benefit us progressively in 2010 and 2011. We successfully launched our Activv™ FM internal antennae, with strong interest from all the top 10 OEMs. Close to 8 million phones with this technology were sold in 2009. We also developed and offered to customers a "full metal cover" antenna, a collaboration across product lines that uses the external cover of the phone as an antenna, enabling greater industrial design freedom and improving antenna performance.

 

We successfully launched our new laser directed structuring antennae, a method of applying three dimensional antennae patterns onto a plastic carrier using an advanced laser system. We also broadened our product offering during the year with the successful launch of our mobile broadband PC antennae products, and our first Long Term Evolution ("LTE", or 4G) platforms.

 

Operationally, we have increased our own vertical integration, offering greater flexibility to customers while preserving margins and reducing inventory. Our continuous improvement programmes have lowered our cost of quality and improved yields, benefitting margins. We closed our handset products manufacturing in Szombathely, Hungary, with production successfully transferred to China and India. We have at the same time increased our design and engineering facilities in Korea, China and Taiwan to best position us to serve our local customers.

 

We expect 2010 to be a year of transition in this division, with a rebalancing of revenues across a broader customer base, but with continuing benefits from the cost reduction actions we have taken.

 

WIRELESS SYSTEMS DIVISION

 

Year ended 31 December	2009 (£'m)			2008
	H1	H2	Year	(£'m)
Revenue	37.4	47.5	84.9	95.7
Underlying operating profit	0.3	2.6	2.9	8.0
Return on sales	0.8%	5.5%	3.4%	8.4%

 

We design and supply a range of customised, high specification wireless antennae, and machine-to-machine ("M2M") wireless modules, which can include micro-processors and embedded software, for the infrastructure, automotive and transportation, municipal, industrial and instrumentation, datacom, security, retail and asset management markets.

 

Divisional revenues declined by 11% in 2009 to £85.0 million (2008: £95.7 million); in US Dollars, the year-on-year decline was 25%.

 

The majority, 57%, of the division's revenues in 2009 were from telematics antennae and modules into the automotive market, with 34% of revenues from the infrastructure, datacom, security and asset management sectors, and 9% from sales of our wireless M2M modules.

 

Our telematics antennae product lines suffered particularly in the first half of 2009, as a result of the general downturn in the automotive industry which was amplified by the bankruptcy filing by two of the division's major customers. These bankruptcies were resolved and this, together with a more general recovery in the division's markets, resulted in revenues in the second half of 2009, expressed in US Dollars, being up 57% compared with the first half.

 

Year-on-year, the division experienced a decline in revenues across virtually all its markets and product lines, although vehicular wireless and Land Mobile Radio revenues, held up well and in automotive telematics we made the first significant penetration with the remaining customer in the US "top 3" automotive OEMs.

 

We saw a strong recovery during the second half of 2009 in our automotive telematics, wireless modules and WLAN antennae revenues, compared with the first half of the year. We also won a number of new platforms with the top US and European car makers, which will benefit us in 2011 and 2012.

 

We are developing our "subsystems" offering in telematics, with increasing business in the asset tracking, insurance, and credit market sectors. We are integrating 802.11, Wireless LAN and Bluetooth into our telematics products, broadening the scope of the products and providing a greater range of options for our customers across various wireless protocols.

 

Although recovery in our infrastructure antennae product lines in the second half of 2009 was more muted, particularly in North America, overall we saw a progressive growth in revenues through the third and fourth quarters of 2009, compared with the second quarter. In addition, our development of various Bluetooth, Zigbee and proprietary radio applications is allowing us to expand our product profile into retail, meter reading and remote diagnostic applications. Our focus on geographic expansion, notably in Asia, began to produce results during the second half of 2009, with further benefits expected in 2010.

 

The division's underlying operating profit fell 64% in the year to £2.9 million (2008: £8.0 million). Return on sales fell from 8.4% in 2008 to 3.4% in 2009, with the margin decline being caused primarily by the overall decline in revenues, as a result of customers reducing their car volume projections. However, underlying operating profit recovered well in the second half of 2009 (£2.6 million) compared with the first half (£0.3 million), as a result of higher revenues and the benefit of cost reductions; return on sales in the second half increased to 5.5% compared with 0.8% in the first half of the year.

 

We have introduced a number of new products during the year, providing greater penetration of existing customers as well as broadening the customer base. In telematics, for example, we have developed a "smart antennae" solution which combines cellular and GPS / Satellite antennae, wireless modules and input / output interfaces, all software controlled. This is allowing us to expand considerably our telematics capabilities, beyond our traditional satellite digital radio offering.

 

We also developed a dual band MIMO internal antennae family to enhance the latest generation of Wireless LAN technology systems, the next generation "Stealth II" GPS, and new Bluetooth antennae products. We also introduced a new Land Mobile Radio family for the China Public Safety market, for handheld and vehicular applications. All of these products should lead to new, additional revenue in 2010 and beyond.

 

Operationally during the year, we closed down manufacturing at our New Hampshire, USA facility and downsized manufacturing in Illinois, USA, with production being expanded in Malaysia and China. Overheads across the division have been reduced, while design and engineering have been downsized in North America and Europe and expanded in Malaysia and India.

 

During 2009 we have been successfully "re-engineering" the division, expanding our technology capabilities, product range and geographic presence, while ensuring a more cost effective manufacturing base. We began to see a recovery in revenues in the second half of 2009, and we have seen this continue into 2010.

 

OUTLOOK

 

Trading conditions proved to be very challenging in 2009 and against this background we took decisive actions to reduce costs and align our operations to the market environment. We also strengthened Laird's balance sheet in the light of the uncertain conditions and the limited visibility of customer demand.

 

By the end of 2009 we had seen some recovery in a number of our markets and this, together with the benefits of our cost reductions, led to a significant improvement in underlying profits and operating margin in the second half of 2009. Operating cash conversion was particularly strong in the year.

 

While the profile of an economic recovery remains uncertain, we have so far in 2010 seen a continuation of the trends experienced in the second half of 2009. We have a sound financial structure, and we retain leading positions in the majority of our markets. We continue to expand our customer base, to maintain our investment in engineering and new product development, and to focus on operational excellence and customer service. We believe that the fundamentals of our markets remain attractive, and that we are well placed to capitalise on opportunities as these markets return to growth.

 

FINANCE DIRECTOR'S REPORT

 

Revenue

Revenue from continuing operations fell to £528.8 million in 2009 from £635.3 million in 2008. Revenues when stated in US Dollars fell by 30% in 2009; Performance Materials revenues were 19% lower, Handset Products were 36% lower and Wireless Systems were 25% lower. The table below shows revenues in US Dollars for each half year for both 2008 and 2009.

 

	Performance Materials	Handset Products	Wireless Systems	Total
	$m	$m	$m	$m
2008
First half	191.2	335.9	95.0	622.1
Second half	162.9	310.9	82.5	556.3
Total for the year	354.1	646.8	177.5	1,178.4
2009
First half	129.2	213.2	56.0	398.4
Second half	156.1	197.6	77.1	430.8
Total for the year	285.3	410.8	133.1	829.2

 

The top five customers invoiced accounted for 51% of revenue in 2009 (2008, 56%).

 

Underlying Operating Profit / Net Margins

The table below shows underlying operating profit in US Dollars. There was a considerable improvement in the second half of 2009 compared to the first half. Underlying operating profit more than doubled, with an increase in each of the three Divisions.

 

Underlying Operating Profit	Performance Materials	Handset Products	Wireless Systems	Total
	$m	$m	$m	$m
2008
First half	27.1	38.1	9.7	74.9
Second half	15.8	31.3	5.2	52.3
Total for the year	42.9	69.4	14.9	127.2
2009
First half	7.2	9.4	0.5	17.1
Second half	22.7	8.9	4.1	35.7
Total for the year	29.9	18.3	4.6	52.8

 

Net margins for the full year were 6.4% in 2009 (2008, 10.8%). Margins were 4.3% in the first half and almost doubled to 8.5% in the second half of the year with higher margins across all segments.

 

Profit

Profit before tax from continuing operations was £4.6 million (2008, £26.5 million). There was a loss after tax for the year from discontinued operations of £1.9 million (2008, £nil).

 

Underlying Profit

Continuing underlying profit before tax in the year was £26.5 million (2008, £60.6 million). Underlying profit is defined as profit before tax, exceptional items, amortisation of acquired intangible assets, 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 6.

 

Exceptional Costs

The steps taken to reduce headcount and capacity as a result of the lower levels of activity have resulted in £10.2 million of exceptional costs in 2009 (2008, £20.3 million). Note 3 analyses these costs by Division. The cash outlay in the period was £12.0 million (including cash spent on exceptional items provided for in 2008) with a further cash outlay of around £5 million to come in 2010.

 

Finance Costs

Finance costs, excluding a gain on the fair valuing of financial instruments of £1.6 million (2008, loss of £2.4 million) were £7.1 million compared to £7.9 million in 2008. Interest cover was 4.2 times, compared to the minimum of 2.5 required by the covenant in the Group's principal loan agreements.

 

Taxation

The underlying tax charge on total underlying profit before tax is equivalent to an average tax rate of 23.4%, higher than 19.8% in 2008, with the principal cause of the increase being a lower level of tax incentives in China.

 

Profits in the USA are subject to a relatively low charge and should remain so for many years in part due to tax deductions for amortised goodwill resulting from acquisitions. A significant proportion of profits are also from jurisdictions with low tax rates or with tax incentives.

 

Underlying Earnings

Continuing underlying earnings per share were 9.6p (2008, 23.8p, as adjusted for the bonus element of the Rights Issue). Underlying earnings are based on underlying profit less underlying tax and exclude deferred tax on acquired intangible assets and goodwill. Following the Rights Issue there were 266.3 million shares in issue compared with an average of 211.6 million in 2009 (2008, 204.3 million).

 

Cash Flow

 

Analysis of cash flow
		2009
		£m
Operating profit		33.6
Depreciation / amortisation of capitalised development costs		22.3
Other non-cash		1.3
		57.2
Reduction in working capital*		20.0
Capitalised development costs		(11.1)
Capital expenditure less disposals		(16.4)
Operating cash flow		49.7
Finance costs		(7.7)
Taxation		(9.8)
Trading cash flow surplus		32.2
Dividends		(14.0)
Acquisitions / disposals		(4.4)
Exceptional costs		(12.0)
Share issues		83.0
Exchange translation movement		9.3
Reduction in net borrowings		94.1

 

* after adjusting for creditor increases on exceptional items of £7.4 million.

 

There was a significant working capital decrease of £20.0 million largely due to the successful execution of inventory reduction programmes which was the principal factor in delivering a good cash conversion (operating cash flow as a proportion of operating profit) result of 148%. The dividend outflow of £14.0 million was in respect of the final dividend for 2008 only. The interim dividend for 2009 was paid in January 2010.

 

Treasury Policies

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

 

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

 

Interest Rate Risk

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

 

Credit and Counterparty Risk

The Group's policy on counterparty risk management is to place cash deposits and other financial instruments with our relationship banks, all of whom also provide credit facilities to the Group. The level of exposure to each bank is continually monitored. As at 31 December 2009 all cash and short-term deposits had a maturity of less than one month.

 

Foreign Exchange Management

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

 

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

 

Net Borrowings and Debt Facilities

Overall, net borrowings decreased by £94.1 million to £45.4 million; £83.0 million of the reduction was the proceeds net of expenses from a 1 for 2 Rights Issue.

 

A cornerstone of Laird's 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 £265 million (2008, £265 million) of bilateral revolving credit facilities which do not expire until August 2012. In addition, Laird has in issue $150 million (£92.6 million) of US Dollar Private Placement notes which are repaid between 2010 to 2012 ($10 million), 2014 ($97 million) and 2016 ($43 million).

 

Covenants

A key consideration for financial planning is to maintain sufficient headroom between borrowings and the ceiling set by the covenants. The Group's bank facilities and US Private Placement loan notes contain two principal financial covenants; net debt/EBITDA (earnings before exceptional items, interest, tax, depreciation and amortisation), and interest cover.

 

For the year ended 31 December 2009, net borrowings were 1.0 times EBITDA, 29% of the maximum permitted of 3.5 times. Interest cover was 4.2 times against the minimum requirement of 2.5 times. Thus, there was sufficient financial headroom.

 

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

 

Currencies in 2009

The average and period end exchange rates are set out in note 2. In 2009, some 88% of revenues were negotiated in US Dollar and Renminbi (which was pegged to the US Dollar in 2009) with a further 9% in Euros. In 2009 there was a US Dollar surplus but in most other currencies, costs exceeded revenues, the most significant being the Japanese Yen, the Swedish Krona and the Korean Won which together account for 10% of costs.

 

We strive to balance local currency exposures but we operate a global business and this can create some currency imbalances where we cannot always match operating or procurement costs with revenues in that currency.

 

In addition, there is a translation impact in converting profits into our reporting currency (Pound Sterling); each US$0.01 appreciation against sterling approximates to an annual increase in operating profit of £0.4 million.

 

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

 

Pensions

There are 12 employees who are active members of defined benefit plans and approximately 1,700 deferred and current pensioners. There is an overall defined benefit pension scheme deficit under IAS 19 of £2.5 million at 31 December 2009. At 31 December 2008, there was an overall surplus of £0.1 million.

 

The principal causes of the elimination of the surplus and the move into deficit were changes in the assumptions used to calculate liabilities. The bond rate used to discount liabilities was 5.65% in 2009 compared to 6.1% in 2008, which together with a higher inflation rate assumption of 3.8% (2008, 3.1%) and a more conservative mortality assumption, contributed to the increase in the estimate of £10.7 million for liabilities. This was offset in part by a £7.1 million increase in the value of the assets.

 

Shareholders' Funds

Shareholders' funds at the 2009 year end were £579.6 million (2008, £585.3 million). The reconciliation is set out in the Group statement of changes in equity. The 1 for 2 Rights Issue added £83.0 million (net of expenses) and this was offset by exchange translation differences and the dividend (final for 2008).

 

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 5.1% compared to 11.2% in 2008.

 

 

Group income statement

for the year to 31 December 2009

 

		2009	2008
		£m	£m
Note
	Continuing operations
1	Revenue	528.8	635.3
	Operating profit before amortisation of acquired intangible assets and exceptional items	33.6	68.5
	Amortisation of acquired intangible assets	(13.3)	(11.4)
3	Exceptional items	(10.2)	(20.3)
	Operating profit	10.1	36.8
4	Finance revenue	0.6	0.5
4	Finance costs	(7.8)	(9.6)
4	Financial instruments - fair value adjustments	1.6	(2.4)
	Other net finance revenue - pension	0.1	1.2
	Profit before tax from continuing operations	4.6	26.5
6	Taxation	(6.2)	(12.2)
	(Loss) / profit for the year from continuing operations	(1.6)	14.3
	Discontinued operations
	Loss for the year from discontinued operations	(1.9)	-
	(Loss) / profit for the year - attributable to equity shareholders	(3.5)	14.3
5	Earnings per share
	Basic from continuing operations	(0.8)p	7.0p
	Diluted from continuing operations	(0.8)p	7.0p
	Basic on (loss) / profit for the year	(1.7)p	7.0p
	Diluted on (loss) / profit for the year	(1.7)p	7.0p

 

6	Underlying profit before tax*
	Continuing	26.5	60.6
	Underlying basic earnings per share*
	Basic from continuing operations	9.6p	23.8p
	Diluted from continuing operations	9.6p	23.7p

 

*before amortisation of acquired intangible assets, exceptional items, deferred tax on acquired intangible assets and goodwill, 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 2009

 

		2009	2008
		£m	£m
Note
	(Loss) / profit for the year	(3.5)	14.3
8	Net actuarial losses on retirement benefit obligations	(2.4)	(9.7)
	Deferred tax on actuarial gains / losses	-	1.7
	Exchange differences on retranslation of overseas net investments	(75.9)	196.6
	Exchange differences on net investment hedges	12.7	(47.4)
	Other comprehensive (loss) / income for the year	(65.6)	141.2
	Total comprehensive (loss) / income for the year - attributable to equity shareholders	(69.1)	155.5

 

Group statement of changes in equity

for the year to 31 December 2009

 

		Ordinary
		share	Share	Merger	Retained	Translation	Treasury
		capital	premium	reserve	earnings	reserve	shares	Total
Note		£m	£m	£m	£m	£m	£m	£m

 

for the year to 31 December 2008

	At 1 January 2008	49.8	268.9	-	128.4	3.3	(1.9)	448.5
	Profit for the year	-	-	-	14.3	-	-	14.3
	Other comprehensive (loss) / income	-	-	-	(8.0)	149.2	-	141.2
	Total comprehensive income	-	-	-	6.3	149.2	-	155.5
	Exercise of share options	0.1	0.8	-	-	-	-	0.9
	Share based payments	-	-	-	1.8	-	-	1.8
	Deferred tax on share based payments	-	-	-	(0.7)	-	-	(0.7)
	Treasury shares	-	-	-	-	-	0.4	0.4
	Vesting of LTIPs	-	-	-	(1.3)	-	1.3	-
	Dividends paid	-	-	-	(21.1)	-	-	(21.1)
	At 31 December 2008	49.9	269.7	-	113.4	152.5	(0.2)	585.3

 

for the year to 31 December 2009

	At 1 January 2009	49.9	269.7	-	113.4	152.5	(0.2)	585.3
	Loss for the year	-	-	-	(3.5)	-	-	(3.5)
	Other comprehensive loss	-	-	-	(2.4)	(63.2)	-	(65.6)
	Total comprehensive loss	-	-	-	(5.9)	(63.2)	-	(69.1)
	Rights Issue of share capital	25.0	-	63.8	-	-	-	88.8
	Rights Issue expenses	-	-	(5.8)	-	-	-	(5.8)
	Transfer between reserves	-	-	(58.0)	58.0	-	-	-
	Share based payments	-	-	-	1.6	-	-	1.6
	Treasury shares	-	-	-	-	-	(0.1)	(0.1)
	Vesting of LTIPs	-	-	-	(0.1)	-	0.1	-
7	Dividends paid	-	-	-	(14.0)	-	-	(14.0)
7	Dividends payable	-	-	-	(7.1)	-	-	(7.1)
	At 31 December 2009	74.9	269.7	-	145.9	89.3	(0.2)	579.6

 

Group statement of financial position

as at 31 December 2009

 

		2009	2008
Note		£m	£m
	Assets
	Non-current assets
	Property, plant and equipment	108.6	123.7
	Intangible assets	542.4	610.0
	Deferred tax assets	3.6	2.7
8	Retirement benefit assets	2.3	4.0
	Other non-current assets	1.8	1.0
		658.7	741.4
	Current assets
	Derivative financial instruments	-	0.5
	Inventories	49.6	80.2
	Trade and other receivables	121.0	129.0
	Income tax receivable	1.3	2.9
	Cash	53.7	46.9
		225.6	259.5
	Liabilities
	Current liabilities
9	Borrowings	(8.5)	(7.6)
	Derivative financial instruments	(0.8)	(2.9)
	Trade and other payables	(108.8)	(115.1)
	Current tax liabilities	(3.6)	(6.8)
	Provisions	(5.0)	(7.0)
		(126.7)	(139.4)
	Net current assets	98.9	120.1
	Non-current liabilities
9	Borrowings	(90.6)	(178.8)
	Income tax payable	(26.5)	(28.9)
	Deferred tax liabilities	(51.0)	(57.8)
8	Retirement benefit obligations	(4.8)	(3.9)
	Other non-current liabilities	(0.5)	(2.8)
	Provisions	(4.6)	(4.0)
		(178.0)	(276.2)
	Net assets	579.6	585.3
	Capital and reserves
10	Equity share capital	74.9	49.9
	Share premium	269.7	269.7
	Retained earnings	145.9	113.4
	Translation reserve	89.3	152.5
	Treasury shares	(0.2)	(0.2)
	Total shareholders' equity	579.6	585.3

 

Group cash flow statement

for the year to 31 December 2009

 

		2009	2008
Note		£m	£m
11	Cash flows from operating activities
	Cash generated from operations	65.3	73.7
	Tax paid	(9.8)	(17.2)
	Net cash flows from operating activities	55.5	56.5
	Cash flow from investing activities
	Interest received	0.6	0.5
	Acquisition of businesses (net of cash acquired)	(1.8)	(17.7)
	Purchase of property, plant and equipment	(17.1)	(30.0)
	Purchase of intangible assets (internally developed)	(11.1)	(7.3)
	(Outflow) / inflow from sale of businesses	(2.6)	11.5
	Proceeds from sales of property, plant and equipment	0.7	1.3
	Net cash flows from investing activities	(31.3)	(41.7)
	Cash flows from financing activities
	Interest and other finance costs paid	(8.3)	(10.2)
	Net proceeds from issue of ordinary share capital	83.0	0.9
	Movement in treasury shares	(0.1)	0.4
	(Decrease) / increase in borrowings	(73.7)	16.8
	Dividends paid to shareholders	(14.0)	(21.1)
	Net cash flows from financing activities	(13.1)	(13.2)
	Effects of movements in foreign exchange rates	(4.3)	12.9
	Increase in cash and cash equivalents for the year	6.8	14.5
	Cash and cash equivalents at 1 January	46.9	32.4
	Cash and cash equivalents at 31 December	53.7	46.9

 

Notes to the financial statements

for the year ended 31 December 2009

 

1 Segmental analysis

 

During the year, the Group adopted IFRS 8, Operating Segments, which replaces IAS 14. Under IFRS 8, segments are identified on the basis of management information which is reviewed by the Group's Chief Operating Decision Maker.

 

As a result of adopting IFRS 8, the directors are of the opinion that the primary business segments as reported under IAS 14 should remain unchanged.

 

The Group will continue to report the following segments:

 

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.

 

Handset Products - supplies customised, high performance products to mobile phone handset and handheld device manufacturers.

 

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

 

 

	Performance		Handset		Wireless
	Materials		Products		Systems		Total
	2009	2008	2009	2008	2009	2008	2009	2008
	£m	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue from customers	181.9	190.9	262.0	348.7	84.9	95.7	528.8	635.3
Segment profit before:	19.0	23.1	11.7	37.4	2.9	8.0	33.6	68.5
Amortisation of acquired intangible assets	(3.5)	(3.0)	(4.0)	(3.6)	(5.8)	(4.8)	(13.3)	(11.4)
Exceptional items	(2.6)	(13.8)	(4.3)	(3.3)	(3.3)	(3.2)	(10.2)	(20.3)
Operating profit / (loss)	12.9	6.3	3.4	30.5	(6.2)	-	10.1	36.8
Finance revenue							0.6	0.5
Finance costs							(7.8)	(9.6)
Financial instruments - fair value adjustments							1.6	(2.4)
Other net finance revenue - pension							0.1	1.2
Profit before tax							4.6	26.5
Taxation							(6.2)	(12.2)
(Loss) / profit for the year							(1.6)	14.3
Segment assets	368.9	419.9	297.5	334.0	201.1	230.2	867.5	984.1
Unallocated assets	-	-	-	-	-	-	16.8	16.8
Total assets	368.9	419.9	297.5	334.0	201.1	230.2	884.3	1,000.9
Segment liabilities	27.3	44.0	52.1	51.3	18.9	16.2	98.3	111.5
Unallocated liabilities
- borrowings	-	-	-	-	-	-	99.1	186.4
- other (see below)	-	-	-	-	-	-	107.3	117.7
Total liabilities	27.3	44.0	52.1	51.3	18.9	16.2	304.7	415.6
Other segment items
Capital additions	5.9	15.2	18.1	18.1	5.1	3.8	29.1	37.1
Acquisition of businesses	-	-	-	-	-	13.0	-	13.0
Total additions	5.9	15.2	18.1	18.1	5.1	16.8	29.1	50.1
Depreciation	7.2	4.9	7.8	5.9	1.7	1.6	16.7	12.4
Amortisation of intangible assets	4.1	3.6	7.2	5.3	8.2	5.6	19.5	14.5

 

The Group did not have any inter-segment revenue in 2009 and 2008.

 

Revenue from one customer of the Performance Materials division and Handset Products division represents approximately £190m (2008, £250m) of the Group's total revenues.

 

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

 

Geographic information

 

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

 

North America, Europe, Asia and Rest of World.

 

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

 

	Revenue		Non-current assets
	2009	2008	2009	2008
	£m	£m	£m	£m
Continuing operations
North America	112.3	129.0	455.6	521.5
Europe	72.2	101.4	98.6	107.8
Asia	335.4	387.8	98.6	105.4
Rest of World	8.9	17.1	-	-
	528.8	635.3	652.8	734.7

 

Revenue from UK customers (the Group's country of domicile) was £6.3m (2008, £7.5m).

 

2 Exchange rates 

 

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

 

	Average		Closing
	2009	2008	2009	2008
Czech Koruna	29.75	31.47	29.72	27.77
Euros	1.12	1.26	1.13	1.03
Japanese Yen	146.50	192.62	150.34	130.33
Renminbi (RMB)	10.71	12.91	11.03	9.81
Swedish Krona	11.94	12.09	11.53	11.37
US dollars	1.57	1.86	1.62	1.44

 

3 Exceptional items

 

	2009	2008
	£m	£m
Continuing operations:
Performance Materials
Property, plant and equipment write downs	(2.2)	(1.5)
Inventory write downs	(0.4)	(1.4)
Other restructuring costs	-	(10.9)
	(2.6)	(13.8)
Handset Products
Property, plant and equipment write downs	(1.2)	(0.3)
Inventory write downs	(0.2)	(0.1)
Other restructuring costs	(2.9)	(2.9)
	(4.3)	(3.3)
Wireless Systems
Capitalised development costs write downs	(0.6)	-
Inventory write downs	(0.6)	(0.1)
Other restructuring costs	(2.1)	(3.1)
	(3.3)	(3.2)
	(10.2)	(20.3)

 

 Note

 

(a)	The total cash outlay for exceptional costs in 2009 was £12.0m (2008, £9.7m).
(b)	The tax effect on exceptional items in 2009 is a £1.8m tax credit (2008, £2.2m tax credit).
(c)	Other restructuring costs include redundancy and site closure costs.

 

4 Finance revenues and costs

 

	2009	2008
	£m	£m
Finance revenue
Interest income	0.6	0.5
Finance costs
Interest payable on bank loans and overdrafts	(1.3)	(2.7)
Interest payable on other loans	(5.6)	(6.0)
Other finance charges	(0.9)	(0.9)
	(7.8)	(9.6)
Financial instruments - fair value adjustments	1.6	(2.4)

 

5  Earnings per share

 

The calculation of basic and diluted earnings per share is based on the (loss) / 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 (loss) / 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.

 

	2009	2008
	£m	£m
(Loss) / profit
(Loss) / profit after tax from continuing operations	(1.6)	14.3
Loss from discontinued operations	(1.9)	-
(Loss) / profit for the year	(3.5)	14.3
	Number	Number
	of shares	of shares
		(restated)
	(m)	(m)
Weighted average shares
Basic weighted average shares	211.6	204.3
Options	0.5	1.2
Diluted weighted average shares *	212.1	205.5
Earnings per share	Pence	Pence
Basic from continuing operations	(0.8)	7.0
Diluted from continuing operations	(0.8)	7.0
Basic from discontinued operations	(0.9)	-
Diluted from discontinued operations	(0.9)	-
Basic on (loss) / profit for the year	(1.7)	7.0
Diluted on (loss) / profit for the year	(1.7)	7.0

 

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

 

Comparative figures for weighted average number of shares and earnings per share have been restated after adjusting for the bonus element of the 1 for 2 Rights Issue in 2009. The adjustment factor is 1.1528 calculated using 166p per share, being the closing price on 29 October 2009.

 

6 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 23.4% (2008, 19.8%) of underlying profit before tax.

 

	2009	2008
	£m	£m
Profit
Continuing profit before amortisation of acquired intangible assets and exceptional items	33.6	68.5
Finance revenue	0.6	0.5
Finance costs	(7.8)	(9.6)
Other finance revenue - pension	0.1	1.2
Continuing underlying profit before tax	26.5	60.6
Discontinued operating profit before amortisation of acquired intangible assets and exceptional items	-	-
Total underlying profit before tax	26.5	60.6
Tax
The underlying tax charge is calculated as follows:
Underlying tax on continuing operations	6.2	12.0
Underlying tax on discontinued operations	-	-
Total underlying tax	6.2	12.0
Continuing underlying tax rate	23.4%	19.8%
Tax relief on exceptional items	(1.8)	(2.2)
Deferred tax on goodwill and acquired intangible assets	1.8	2.4
Tax on prior period discontinued operations	-	-
Tax on fair value movement of financial instruments	-	-
Total tax charge	6.2	12.2
Analysis of tax charge:
Tax on profit from continuing operations	6.2	12.2
Tax on discontinued operations	-	-
Total tax charge	6.2	12.2
Earnings per share	Pence	Pence
Continuing underlying earnings per share - basic	9.6	23.8
Continuing underlying earnings per share - diluted	9.6	23.7

 

Comparative figures for weighted average number of shares and earnings per share have been restated after adjusting for the bonus element of the 1 for 2 Rights Issue in 2009. The adjustment factor is 1.1528 calculated using 166p per share, being the closing price on 29 October 2009.

 

7 Dividends paid and proposed

 

On 9 March 2010 the Board declared, subject to approval from shareholders, a final dividend of 2.53p per share (2008, 6.84p). The final dividend will be paid on 4 June 2010 to shareholders registered on 7 May 2010. Dividends paid are charged to retained earnings on the earlier of the date of payment or the date on which they become a legal liability of the Company.

 

	Dividends paid		Dividends declared /
			proposed*
Total Dividends	2009	2008	2009	2008
	£m	£m	£m	£m
Final 2007	-	14.0	-	-
Interim 2008	-	7.1	-	7.1
Final 2008	14.0	-	-	14.0
Interim 2009	-	-	7.1	-
Final 2009	-	-	6.7	-
	14.0	21.1	13.8	21.1

 

Dividends per share†	Dividends paid		Dividends declared /
			proposed*
	2009	2008	2009	2008
	Pence	Pence	Pence	Pence
Final 2007	-	6.84	-	-
Interim 2008	-	3.47	-	3.47
Final 2008	6.84	-	-	6.84
Interim 2009	-	-	3.47	-
Final 2009	-	-	2.53	-
	6.84	10.31	6.00	10.31

 

*	attributable to the period
†	Prior period and the interim 2009 dividends per share have been adjusted to reflect the bonus element of the Rights Issue in 2009

 

8 Retirement benefit obligations

 

Pension schemes

12 employees (2008, 14) are members of two different defined benefit schemes and these schemes have approximately 1,700 (2008, 1,700) deferred and current pensioners. The employer contributions made to these schemes during the year were £0.3m (2008, £1.0m).

 

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

 

	Schemes
	in
	surplus			Schemes
	with a			in surplus
	right to a	Other		with a right	Other	Total
	refund	schemes	Total	to a refund	schemes
	2009	2009	2009	2008	2008	2008
	£m	£m	£m	£m	£m	£m
Annuities	9.0	-	9.0	8.4	-	8.4
Equities	37.5	-	37.5	29.3	-	29.3
Gilts and bonds	44.8	-	44.8	42.0	-	42.0
Other including cash	0.1	-	0.1	4.6	-	4.6
Total market value of assets	91.4	-	91.4	84.3	-	84.3
Present value of scheme liabilities	(87.9)	(4.8)	(92.7)	(78.1)	(3.9)	(82.0)
Funded status	3.5	(4.8)	(1.3)	6.2	(3.9)	2.3
Disallowed assets	(1.2)	-	(1.2)	(2.2)	-	(2.2)
Surplus / (deficit) in the schemes	2.3	(4.8)	(2.5)	4.0	(3.9)	0.1

 

9 Borrowings

 

	2009	2008
	£m	£m
Current:
Short term borrowings	4.4	1.3
US Private Placement loans due 2010	2.1	-
Acquisition related loan notes	2.0	6.3
	8.5	7.6
Non-current:
US Private Placement loans due 2010/2012	4.1	7.0
US Private Placement loans due 2014	59.9	67.2
US Private Placement loans due 2016	26.5	29.8
Bilateral revolving bank loans	-	74.8
Other term loans	0.1	-
	90.6	178.8
Total borrowings	99.1	186.4

 

Notes

 

(a)	US Private Placement loans, arising from private placements of debt with US insurance companies, comprise $10m (2008, $10m) repayable between 2010 and 2012 at a fixed rate of interest of 7.44% and $140m (2008, $140m) repayable between 2014 and 2016 at an average fixed rate of interest of 5.64%.
(b)	The Group had committed bilateral revolving bank loan facilities of £265m which were underwritten in excess of two years. Drawings by Group companies under these facilities were £nil (2008, £75.1m). Although these drawings are repayable within one year they are classified as long term as they can be refinanced under the terms of the facilities.

 

10 Authorised and issued share capital

 

		2009		2008
Authorised		£m		£m
320,000,000 (2008, 248,888,888) ordinary shares of 28.125p		90.0		70.0
	2009		2008
Issued and fully paid	Shares	£m	Shares	£m
Ordinary shares of 28.125p each
At 1 January	177,534,804	49.9	177,262,248	49.8
Issued for exercise of share options	-	-	272,556	0.1
Issued by Right	88,767,402	25.0	-	-
At 31 December	266,302,206	74.9	177,534,804	49.9

 

During the year no shares were issued under the Company's 2003 executive share option scheme (2008, 272,556 ordinary shares were issued under the Company's 2003 executive share option scheme for a consideration of £861,054).

 

266,302,206 ordinary shares of 28.125p each were in issue at the year end (2008, 177,534,804 shares of 28.125p each). On 28 October 2009 the Company announced a 1 for 2 Rights Issue at 100 pence per new share. The Rights Issue raised £88.8m and Issue expenses were £5.8m.

 

At 31 December 2009, options to subscribe for 3,418,860 ordinary shares at prices between 140p and 510p were outstanding under the Company's executive share option schemes (2008, 2,642,117 ordinary shares at prices between 140p and 510p, as adjusted for the Rights Issue). Options outstanding under the schemes are held by 17 individuals and are exercisable at various times up to 12 May 2019. No further options have been granted since the year end.

 

11 Additional cash flow information

 

Cash generation from operations

 

Continuing operations	2009	2008
	£m	£m
Net (loss) / profit after taxation	(1.6)	14.3
Depreciation and other non-cash items
Depreciation	16.7	12.4
Amortisation of capitalised development costs	5.6	3.1
Exceptional property, plant and equipment write downs	3.4	1.8
Exceptional capitalised development costs write downs	0.6	-
Exceptional inventory write downs	1.2	1.6
Profit on disposal of property, plant and equipment	-	(0.2)
Share based payments	1.6	1.8
Amortisation of acquired intangible assets	13.3	11.4
Financial instruments - fair value adjustments	(1.6)	2.4
Pension charges	0.4	0.6
Other net finance costs	7.1	7.9
Taxation	6.2	12.2
Net pension contributions	(0.2)	(1.0)
Changes in working capital
Inventories	22.0	(5.2)
Trade and other receivables	(5.1)	56.3
Trade, other payables and provisions	(4.3)	(45.7)
	12.6	5.4
Cash generated from continuing operations	65.3	73.7
Discontinued operations
Loss after taxation	(1.9)	-
Loss on disposal of businesses before taxation	1.9	-
Cash flow from discontinued operations	-	-
Cash generated from operations	65.3	73.7

 

Notes

 

(a)	Changes in working capital from continuing operations are after creditor decreases of £7.4m (2008, £6.8m increases) in respect of exceptional costs of redundancy and restructuring.

 

12 Other information

 

The financial information for the year ended 31 December 2009 set out above has been extracted from the 2009 Annual Report and Accounts which have been audited by Ernst & Young LLP who have given an unqualified audit opinion. The Accounts for 2009 are expected to be filed following the Company's Annual General Meeting to be held on 27 April 2010. The Company's 2009 Annual Report and Accounts, including the notice of Annual General Meeting, will be posted to shareholders.

 

The proposed final dividend will be paid on 4 June 2010 to shareholders registered on 7 May 2010.