Half Yearly Report

RNS Number : 1182Q

Laird PLC

29 July 2010

 

LAIRD PLC

 

RESULTS FOR THE SIX MONTHS TO 30 JUNE 2010

(unaudited)

 

	6 months	6 months
	to 30 June	to 30 June
	2010	2009
	£m	£m
Revenue from continuing operations	274.6	266.1	3%
Underlying operating profit from continuing operations	18.5	11.4	62%
Underlying profit before tax from continuing operations (i)	15.1	7.6	99%
Loss before tax from continuing operations	(9.5)	(0.8)
Operating cash flow from continuing operations	13.1	22.8
Net borrowings	62.8	123.8
Shareholders' equity	595.5	485.5
	p/share*	p/share*
Underlying earnings from continuing operations (i)	4.4	2.8	57%
Basic earnings from continuing operations	(4.6)	(2.0)
Dividend	2.1	3.47

 

Peter Hill, Chief Executive, said:

 

"The majority of our markets have continued to show a recovery from the depressed conditions of 2009. We have made good progress in the first half of 2010, and our underlying profit before tax from continuing operations for the period, at £15.1 million, doubled compared to that in the first half of 2009, driven by particularly strong results from our Performance Materials and Wireless Systems Divisions. Our Handset Products Division is in transition, and we are taking actions to improve its performance.

 

The fundamentals of our markets remain attractive, and our financial position is strong. We are expanding our customer and market base, and reducing our customer concentration, and believe that we will be able to continue to demonstrate further progress."

 

Summary

 

·;	Strong improvement in results compared with the same period in 2009, with benefits from actions taken, end market recovery, and increased penetration with a number of key customers.
·;	Revenue for the half year of £274.6 million, up 3% (up 5% in US Dollars). Customer base expanded and customer concentration reduced. Percentage revenue to our largest OEM customer was 23% in the period, half of the 46% in the same period in 2009.
·;	Higher revenues, margin improvement and lower interest charge resulted in underlying profit before tax doubling to £15.1 million (2009: £7.6 million).
·;	Strong growth maintained at Performance Materials Division:-
	-	Revenue up 31% at £112.7 million.
	-	Underlying operating profit £13.5 million (2009: £4.8 million).
	-	Return on sales improved to 12% from 6% in 2009.
	-	Strong demand from IT, datacom, telecom and consumer markets; market share gains across EMI shielding, thermal management and signal integrity product lines.
·;	Handset Products Division in transition:-
	-	Revenue down 27% at £104.3 million.
	-	Underlying operating profit £2.1 million (2009: £6.3 million).
	-	Good performance in metals with new customer and programme wins, particularly in smartphones, tablets and music devices.
	-	Focusing on improving the performance of antennae systems.
	-	Will withdraw from loss making mechanisms product line.
	-	Improvement expected during second half.
·;	Continuing good recovery in Wireless Systems Division:-
	-	Revenue up 54% at £57.6 million.
	-	Underlying operating profit £2.9 million (2009: £0.3 million).
	-	Return on sales improved to 5% from 1% in 2009.
	-	Demand recovery and market share gains in telematics and wireless modules and devices; pick-up in infrastructure antennae.

 

Explanatory note:

 

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 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 (204.5 million in the first half of 2009) and 266.2 million in 2010, following the Rights Issue announced in October 2009. 2009 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 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.

 

Most of our end markets are showing a recovery from the depressed conditions of 2009. Overall, we are benefitting from the actions we have taken, the increased penetration with a number of key customers, and the expansion of our customer base. In the first half of 2010 we saw a strong performance from our Performance Materials and Wireless Systems Divisions, where we hold leading positions in growing markets. Our Handset Products Division, which comprises three product lines, antennae systems, handset metals and mechanisms, had a more difficult first half.

 

Our largest customer (a mobile phone handset OEM) changed its sourcing strategy in 2009 away from specialist suppliers of discrete technology solutions, such as those sold by our Handset Products Division, towards a small number of large, vertically integrated contract manufacturers, supported by one or more suppliers which were also retained in the OEM supply chain. Our antennae systems product line was retained as a technology leader for antennae solutions but neither of the other two product lines were retained as "Tier 1" suppliers, and as a result those product lines have lost a significant part of their respective businesses to that customer.

 

We continue to evolve our focus and our structure. Notwithstanding a successful three years, our handset mechanisms product line has become loss making this year as a result of this change in sourcing strategy. While we believe that we may be able to rebuild this business over time, the risks and uncertainties involved are such that we do not believe that this strategy would be justified. We are from today pursuing an exit from this product line.

 

Our "handset" metals business, on the other hand, has been successful in more than replacing the lost revenues resulting from our largest customer's sourcing change. In addition, we have successfully broadened its product lines such that it is now a critical supplier for applications beyond mobile handsets, such as tablets, personal music devices, and personal locator devices. There are further opportunities for market segment diversification.

 

Our mobile antennae systems business is recognised by many of our customers to be the "technology leader" for such products. While we have been successful in increasing the volume of our business with our largest handset OEM customer and diversifying the product line's customer base, margins have been under pressure and a number of customers in the downturn have been unwilling to value fully and pay for this technical capability. This is changing as greater focus is placed by both the carriers and the handset OEMs on "over the air" performance. Our business has also been successful in broadening its market penetration beyond mobile phone handsets, into areas such as mobile broadband antennae and industrial mobile computing.

 

With our exit from the mechanisms product line, and the increasing proportion of revenues in both handset metals and antennae systems into non mobile phone applications, we will be changing the Handset Products divisional structure. The handset metals product line will be managed under our Performance Materials Division to maximise synergies with our other EMI shielding products, and antennae systems will be managed under our Wireless Systems Division alongside our other antennae technology businesses.

 

We will report financially on the new, two divisional segmental basis, at the full year 2010 results, together with comparatives for 2009.

 

RESULTS

 

Revenue from continuing operations in the six months to June 2010 was £274.6 million, up 3% (2009: £266.1 million). Revenue in US Dollars in the half year increased by 5%, with revenue in the second quarter of 2010 being up 13% on the comparable quarter in 2009.

 

Underlying operating profit from continuing operations was £18.5 million in the first half of 2010, up 62% (2009: £11.4 million). Underlying operating profit margin percentage, before interest and tax, in the half year was 6.7% (2009: 4.3%).

 

Underlying profit before tax from continuing operations in the six months to June 2010 was £15.1 million, up 99% (2009: £7.6 million). We saw strong growth in operating profits from our Performance Materials and Wireless Systems Divisions, while operating profit in our Handset Products Division declined, with its mechanisms product line moving into loss.

 

Statutory profit before tax from continuing operations in the six months to June 2010, 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 a loss of £9.5 million (2009: loss of £0.8 million). A non cash impairment charge of £18.0 million has been taken as an exceptional item in the first half of 2010 resulting from the decision to withdraw from the mechanisms product line, with the withdrawal itself expected to be cash neutral.

 

Operating cash flow from continuing operations after capital expenditure in the six months to June 2010 was £13.1 million (2009: £22.8 million). As we expected, there was a working capital outflow in the half year as a result of the higher revenues, although capital expenditure was held below depreciation. Operating cash conversion after capital expenditure in the half year was 71%.

 

Net borrowings at the end of June 2010 were £62.8 million (December 2009: £45.4 million). Two dividend payments in the period, together with exchange rate movements, contributed to the increase.

 

Underlying earnings per share from continuing operations in the period were 4.4 pence (2009: 2.8 pence).

 

DIVIDEND

 

The Board has declared an interim dividend of 2.1 pence per share, payable on 3 December 2010 to shareholders registered on 5 November 2010.

 

STRATEGIC DEVELOPMENT

 

Laird has developed organically and acquired a number of leading positions in its core markets with an increasingly broad range of proprietary products, which provide solutions for our customers to allow their own electronic devices to operate efficiently and cost effectively.

 

Laird's hallmark over many years has been one of continuous re-focus and re-invention. We are continuing that journey today.

 

The core business of Laird Technologies was created in 1996 to provide solutions to what were then embryonic radiated electromagnetic interference shielding ("EMI") problems for our customers. From 2000 through 2007 we grew and developed our capabilities in this area, becoming the world leader in this fast growing market (including applications for mobile phone handsets). As the business developed we expanded into contiguous areas including thermal management and conducted EMI.

 

We also expanded into another broadly contiguous high growth area, that of wireless connectivity: this included mobile phone antennae, automotive telematics, wireless modules for industrial applications, and infrastructure communications antennae. At the same time we were very successful in divesting our other, by then non-core, businesses, reinvesting the proceeds in newer, higher growth and return sectors.

 

This strategy allowed us to drive increasing growth in revenue and profits. In 2007 we organised our businesses into three divisions: Handset Products (then almost entirely products for the mobile phone sector), Performance Materials (our EMI, Thermal and signal integrity/conducted EMI product lines) and Wireless Systems (telematics, wireless modules and infrastructure antennae).

 

Our business was increasingly focussed on the growing mobile phone sector, and on the largest OEM in that market. However, in late 2008 and in 2009 we, like many other similar companies, were affected suddenly and negatively by the global recession and subsequent de-stocking in the global supply chain.

 

As we emerge from the recession, a number of factors are apparent. The benefits of our focus on building the capabilities, and maintaining engineering and R&D spend of, our Performance Materials and Wireless Systems Divisions are evident in the revenue growth we are seeing in both those divisions, and in their improving margins.

 

The benefits of our strategy to diversify our customer base are also apparent, exemplified by the fact that in the first half of 2010 we still achieved revenue growth despite the percentage of our total revenues from our largest OEM customer halving from the same period in 2009. We have been particularly successful in winning and growing revenues with other OEMs which are themselves becoming prominent in the "smartphone" segment, as well as in handheld music devices and tablets.

 

Our customer base is expanding and our customer and market concentration is decreasing. We have excellent businesses with leading market positions, covering a wide range of electronics markets, and often with niche positions allowing us to achieve more attractive margins. We focus on technology leadership and maintain a well established low cost manufacturing footprint. Our strategy overall is to continue to strengthen these positions and continue to broaden our customer and market base in the non mobile phone areas. We are pursuing this course, and expect this strategy to deliver continuing progress.

 

PERFORMANCE MATERIALS DIVISION

 

Six months to 30 June	2010	2009
	£m	£m
Revenue	112.7	86.3
Underlying operating profit	13.5	4.8
Return on sales	12.0%	5.6%

 

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.

 

Divisional revenues increased by 31% in the first half of 2010 to £112.7 million (2009: £86.3 million) as a result of increased customer demand, penetration of new market segments as a result of new product development, and market share gains. Expressed in US Dollars, revenue in the half year increased by 33% compared with 2009, to $172.3 million.

 

EMI shielding materials provided 59% of Divisional revenues in the period, thermal management solutions 29% and signal integrity products 12%.

 

By market segment, 50% of the Division's revenues were to the IT, telecommunications and datacom sectors, with the balance to the consumer electronics (9%), industrial and instrumentation (9%), and the medical, automotive and aerospace and defence markets.

 

The Division has performed extremely well, across all of its product lines, growing revenues in excess of market growth. We have seen increased revenues into the datacommunications, notebook PC, desktop PC, telecommunications, consumer and automotive segments, increasing penetration and growing revenues with many of our key customers, and adding new accounts.

 

Our EMI shielding product lines performed well in the first half. Revenue was up 20% on the same period in 2009, driven largely by demand for internet router equipment, telecom base station construction, PC notebooks (with a number of new customer wins), personal GPS devices, and for the military and aerospace market segments.

 

Following a number of new product introductions in our thermal product lines, both interface materials and thermoelectric coolers, our thermal revenues in the first half were up some 50% compared with the same period in 2009. Demand drivers, which included increased penetration at a number of key customers, were from the medical, LED lighting, notebook PC, desktop PC, telecommunications, datacommunications and gaming consoles sectors.

 

Following a re-engineering of our signal integrity product lines, revenues from these product lines in the first half were up some 85% on the first half of 2009. We achieved significant new wins with Japanese printer OEMs, and increased penetration with existing customers.

 

Underlying operating profit increased in the first half to £13.5 million (2009: £4.8 million). Return on sales in the Division increased to 12.0% in the first half of 2010 from 5.6% in the first half of 2009.

 

We successfully launched a number of new products in the first half of 2010, allowing us to increase revenues with key customers as well as achieving new customer wins, and providing margin benefits.

 

Operationally, we closed our signal integrity production in Mexico and relocated it to Shenzhen, southern China. We are installing new thermal interface materials, and thermally conductive circuit board capacity at Tianjin, eastern China, and new thermoelectric cooling production capacity in Shenzhen, southern China.

 

The higher power, speed and performance of electronic devices is expected to underpin demand for our Performance Materials Division's products. We are maintaining our spend on engineering and R&D, including building up these capabilities in Asia. We continue to enhance our competitive position, and the Division is well placed to make further progress in the second half of 2010.

 

HANDSET PRODUCTS DIVISION

 

Six months to 30 June	2010	2009
	£m	£m
Revenue	104.3	142.4
Underlying operating profit	2.1	6.3
Return on sales	2.0%	4.4%

 

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 27% in the first half of 2010 to £104.3 million (2009: £142.4 million). Expressed in US Dollars, revenue in the first half was $159.6 million, down 25% on the first half of 2009. Antennae products contributed 65% of Divisional revenues, actuation mechanisms 9% and handset metals, including BLS, 26%.

 

Revenues from the mechanisms product line declined, as a result of our largest OEM customer's decision to change its sourcing strategy. In US Dollars, mechanisms' revenues in the first half of 2010 were $15.3 million, down from $41.7 million in the first half of 2009.

 

The addressable market for mechanisms is declining with the increasing proportion of "bar" phones in the smartphone segment, and consequently the market for the supply of mechanisms has become increasingly competitive. Our mechanisms product line made an operating loss of approximately £1.5 million in the first half. We have, therefore, decided to exit from this product line, with existing programmes being run out.

 

Our antennae systems product line has been successful in diversifying its customer base and in increasing the number of antennae units shipped. We are also delivering a new generation of three dimensional laser directed structured antennae. However, customer design changes and the effects of programme mix, together with customer price downs, have resulted in a decline in average selling prices. Antennae systems' revenue in US Dollars, in the first half of 2010, was $103.0 million, compared with $132.8 million in the same period in 2009.

 

In our handset metals product line we have also broadened the customer base, particularly within the smartphone segment, and in areas contiguous to, but outside of, mobile phones. Despite the majority of revenues from this product line to our largest OEM customer being lost as a result of the sourcing changes by that customer described above, revenue in US Dollars from handset metals in the first half of 2010, at $41.3 million, was 7% higher than in the same period in 2009. Revenue in the second quarter of 2010 was up 27% compared with the comparable period in 2009.

 

Following our decision to exit from our mechanisms product line, we are changing our Handset Products divisional structure and will bring our mobile antennae systems within our Wireless Systems Division, to ensure that we achieve maximum synergies across our diversified antennae solutions areas. We will be focusing on this business, to ensure that it maximises its contribution to our overall results. Also, we will be combining the handset metals product line into our Performance Materials Division, where we can pursue synergies with other EMI products.

 

The Division's underlying operating profit fell to £2.1 million in the first half of the year (2009: £6.3 million). Return on sales fell to 2.0% (2009: 4.4%).

 

The reduction in, and the low absolute level of, return on sales, has been caused by a number of factors. Although mechanisms reported an operating loss of approximately £1.5 million in the period, this is not expected to recur in the second half. In antennae systems, programme pricing in the period was more competitive than usual, largely as a result of current programmes having been awarded during the more depressed market in 2009. Direct labour costs were up in the period, as a result of both a much tighter labour supply situation in China and some temporary inefficiencies as a result of new antennae technology introductions. The lower revenues in the period also resulted in lower overhead recoveries. An improvement in antennae systems' performance is expected in the second half.

 

WIRELESS SYSTEMS DIVISION

 

Six months to 30 June	2010	2009
	£m	£m
Revenue	57.6	37.4
Underlying operating profit	2.9	0.3
Return on sales	5.0 %	0.8%

 

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

 

Divisional revenues increased by 54% in the first half of 2010 to £57.6 million (2009: £37.4 million). Expressed in US Dollars, divisional revenues increased by 57% to $88.0 million. Telematics antennae, sold primarily into the automotive market, provided 58% of divisional revenues, antennae for the infrastructure, datacom, security and asset management sectors 28%, and wireless M2M systems and modules 14%.

 

Our telematics antennae revenue grew 70% in the first half of 2010, compared with the depressed levels of the same period in 2009 which saw both General Motors and Chrysler file for bankruptcy protection. We have seen some recovery overall in the US automotive market, and have successfully increased our market share with a number of key customers. We have experienced strong growth from our new "intelligent transportation systems" products.

 

We are also seeing the benefits of our subsystems / "smart antennae" product development, where we integrate 802.11, wireless LAN, Bluetooth and cellular antennae, with software controls, into our telematics products, providing a greater range of options for our customers across various wireless protocols. Our wireless module devices themselves also saw good growth, principally into the industrial and electronic point of sale markets.

 

Our infrastructure antennae products gained momentum in the first half, driven largely by renewed growth in the wireless LAN segment. Although still relatively small, revenues of WiMax and RFID products grew strongly in percentage terms.

 

The Division's underlying operating profit increased to £2.9 million in the first half, (2009: £0.3 million). Return on sales increased to 5.0% in the first half of 2010 (2009: 0.8%).

 

We continue to work on improving the Division's margins through vertical integration of our manufacturing processes, including the bringing "in house" of surface mount technology and injection moulding. Economies of scale will also assist margins as we continue to broaden our customer and geographic base, together with new products which provide enhanced performance at a lower cost.

 

Our new product development programme is beginning to show results as our customers come out of the recession, increasing their demand and looking to broaden their own applications. We launched a wide range of new products in the first half, including mobile and fixed WiMax base station antennae, new dish antennae arrays for point-to-point backhaul, our new "Maxblade" internal antennae with enhanced performance, wideband antennae for mobile radio communications, and new 802.11, Bluetooth and 2.4 GHz wireless modules. We continue to enhance the Division's technology capabilities, broaden its product range, and expand its geographic presence. With the continuing trend to wireless connectivity, we expect to see further progress in growing the Division's revenues and profits.

 

OUTLOOK

 

The majority of our markets have continued to show a recovery from the depressed conditions of 2009. We have made good progress in the first half of 2010, and our underlying profit before tax for the first half of 2010, at £15.1 million, doubled compared to that in the first half of 2009, driven by particularly strong results from our Performance Materials and Wireless Systems Divisions. Our Handset Products Division is in transition, and we are taking actions to improve performance.

 

The fundamentals of our markets remain attractive, and our financial position is strong. We are expanding our customer and market base, and reducing our customer concentration, and believe that we will be able to continue to demonstrate further progress.

 

 

Nigel Keen	Peter Hill
Chairman	Chief Executive

 

28 July 2010

 

 

FINANCE DIRECTOR'S REPORT

 

Revenue

 

Revenue from continuing operations increased by 3% to £274.6 million in the first half of 2010 from £266.1 million in 2009. Revenues expressed in US Dollars increased by 5% in the first half of 2010; Performance Materials revenues were 33% higher, Handset Products were 25% lower and Wireless Systems were 57% higher. The table below shows revenues in US Dollars for each segment for the first half year for 2009 and the first half of 2010.

 

	Performance	Handset	Wireless
	Materials	Products	Systems	Total
	$m	$m	$m	$m
2009 revenue	129.2	213.2	56.0	398.4
2010 revenue	172.3	159.6	88.0	419.9
% increase/(decrease)	33%	(25%)	57%	5%

 

Revenue invoiced to the largest customer represented approximately 19% of first half revenue in 2010 (2009: 42%). Total revenue in respect of that customer including revenue invoiced indirectly through its suppliers, amounted to approximately 23% of total revenue in 2010 (2009: 46%). The top five customers accounted for 41% (including revenue invoiced through their suppliers) of total revenue in the first half of 2010 (2009: 54%).

 

Return on Sales (ROS)

 

The table below shows underlying operating profit as a percentage of revenue (return on sales) for each division for the first half of 2009 and 2010. There was a considerable improvement in both Performance Materials and Wireless Systems but a reduction in Handset Products.

 

Return on Sales	Performance	Handset	Wireless
	Materials	Products	Systems	Total
2009 return on sales	5.6%	4.4%	0.8%	4.3%
2010 return on sales	12.0%	2.0%	5.0%	6.7%

 

Overall, ROS increased from 4.3% in the first six months of 2009 to 6.7% in the first six months of 2010.

 

Total R&D spend in the first half of 2010 fell slightly compared with the same period in 2009, and the amount capitalised also fell. Net R&D spend as a percentage of sales in the period was 7.7% (2009: 7.6%).

 

Overhead costs increased in the period compared with the first half of 2009, although the increase was largely as a result of an increase in activity based costs, with employment costs declining. Total overheads in the period were still significantly below the level of the first half of 2008.

 

Underlying Profit

 

Continuing underlying profit before tax in the half year was £15.1 million (2009: £7.6 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 8.

 

Exceptional Items

 

As a result of the decision to terminate the mechanisms product line an asset impairment charge of £18.0 million (non-cash) has been taken in the first half of 2010. It is estimated that additional closure costs of £2.0 million will be incurred in the second half, but no overall cash impact is expected as the liquidation of working capital is expected to fund the cash outlay on closure.

 

Profit

 

The loss before tax from continuing operations was £9.5 million (2009: loss of £0.8 million).

 

The cash outlay on exceptional items in the first six months was £4.0 million in respect of exceptional costs provided for in 2009.

 

Finance Costs

 

Finance costs were £3.4 million (2009: £3.8 million excluding a financial instrument gain of £1.9 million). Interest cover was 5.9 times, compared to the minimum of 2.5 times required by the covenant in the Group's principal loan agreements.

 

Taxation

 

The underlying tax charge on underlying profit before tax is equivalent to an average tax rate of 21.9% (2009: 24.9%) being the best estimate of the outcome for the full year in 2010.

 

Profits in the USA are subject to a relatively low charge and should remain so for many years in part due to tax deductions for amortised goodwill resulting from acquisitions. A significant proportion of profits are also from jurisdictions with low tax rates or with tax incentives. An analysis of the total tax charge is given in note 8.

 

Underlying Earnings

 

Continuing underlying earnings per share were 4.4p (2009: 2.8p, 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 266.2 million shares in issue in the first half of 2010 compared with an average of 204.5 million in the first half of 2009.

 

Cash Flow

 

Analysis of cash flow
		2010
		£m
Operating profit		18.5
Depreciation		9.1
Amortisation of capitalised development costs		4.3
Other non-cash		0.7
		32.6
Increase in working capital*		(6.3)
Capitalised development costs		(4.8)
Capital expenditure less disposals		(8.4)
Operating cash flow		13.1
Finance costs		(3.5)
Taxation		(4.7)
Trading cash flow surplus		4.9
Dividends		(13.8)
Acquisitions / disposals		(0.5)
Exceptional costs		(4.0))
Increase in net borrowings before exchange movement		(13.4)
Exchange translation movement		(4.0)
Increase in net borrowings since 31 December 2009		(17.4)

 

* after adjusting for creditor decreases on exceptional items of £4.0 million.

 

The dividend outflow of £13.8 million was in respect of both the interim and the final dividend for 2009.

 

Net Borrowings and Debt Facilities

 

Overall, net borrowings increased during the half year by £17.4 million, to £62.8 million.

 

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 (2009: £265 million) of bilateral revolving credit facilities which do not expire until August 2012. In addition, Laird has in issue $150 million (£100.3 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 six months ended 30 June 2010, net borrowings were 1.1 times EBITDA, 31% of the maximum permitted of 3.5 times. Interest cover was 5.9 times against the minimum requirement of 2.5 times.

 

We routinely estimate our expected 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 in the foreseeable future.

 

Currencies in 2010

 

The average and period end exchange rates are set out in note 4. In the first half of 2010, some 84% of revenues were negotiated in US Dollar and Renminbi (which was pegged to the US Dollar for most of the first half of 2010) with a further 7% in Euros. In the first half of 2010 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 7% of costs.

 

We aim 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. The US Dollar strengthened against most currencies relevant to Laird throughout the first half of 2010. The Group aims to cover forward at least 75% of the unmatched cash flows with the result that operating profits were £1.8 million less than they would have been at the prevailing exchange rates. If exchange rates remain at current levels this adverse impact from hedging would not be expected to recur in the second half.

 

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.

 

Principal Risks

 

Laird operates globally in varied markets. The principal risks and uncertainties that are or may be faced are disclosed in the 2009 Annual Report, (Directors' report), and these are expected to continue to be relevant for the remaining six months of the year.

 

The risks set out in the 2009 Annual Report, include the competitive markets in which we operate, the need to respond to technological change, the dependency on a small number of major customers, exposure to increases in commodity prices and the requirement to meet increasingly stringent environmental laws and regulations. Also referred to are the risks associated with changes in the overall growth and demand for our products which could be influenced by the less certain macroeconomic climate.

 

Shareholders' Equity

 

Shareholders' equity at 30 June 2010 was £595.5 million (30 June 2009: £485.5 million). The reconciliation is set out in the Group statement of changes in equity.

 

 

Jonathan Silver

Finance Director

 

28 July 2010

 

 

Statement of directors' responsibilities

 

The directors confirm that to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report set out on pages 1-14 herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules. The Board of directors of Laird PLC that served during the six months to 30 June 2010 and their respective responsibilities are set out in the Laird PLC 2009 Annual Report.

 

By Order of the Board:

 

 

P J Hill, Chief Executive

J C Silver, Finance Director

28 July 2010

 

 

INDEPENDENT INTERIM REVIEW REPORT TO LAIRD PLC

 

Introduction

 

We have been engaged by the Company to review the condensed set of financial statements in the interim report for the six months ended 30 June 2010 which comprises the Group income statement, Group statement of comprehensive income, Group statement of changes in equity, Group statement of financial position, Group cash flow statement and the related notes 1 to 12. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report based on our review.

 

Scope of review

 

We conducted our review in accordance with ISRE (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

Ernst & Young LLP

London

 

28 July 2010

 

 

Group income statement

(unaudited)

 

		6 months	6 months	12 months
		to	to	to
		30 June	30 June	31 Dec
		2010	2009	2009
		£m	£m	£m
Note
	Continuing operations
3	Revenue	274.6	266.1	528.8
	Operating profit before amortisation of acquired intangible assets and exceptional items	18.5	11.4	33.6
	Amortisation of acquired intangible assets	(6.6)	(6.9)	(13.3)
5	Exceptional items	(18.0)	(3.4)	(10.2)
	Operating profit	(6.1)	1.1	10.1
	Finance revenue	-	0.2	0.6
	Finance costs	(3.7)	(4.1)	(7.8)
	Financial instruments - fair value adjustments	-	1.9	1.6
	Other net finance revenue - pension	0.3	0.1	0.1
	Loss before tax from continuing operations	(9.5)	(0.8)	4.6
8	Taxation	(2.8)	(3.2)	(6.2)
	Loss for the period from continuing operations	(12.3)	(4.0)	(1.6)
	Discontinued operations
6	Loss for the period from discontinued operations	-	(1.0)	(1.9)
	Loss for the period	(12.3)	(5.0)	(3.5)
7	Earnings per share
	Basic from continuing operations	(4.6)p	(2.0)p	(0.8)p
	Diluted from continuing operations	(4.6)p	(2.0)p	(0.8)p
	Basic on loss for the period	(4.6)p	(2.5)p	(1.7)p
	Diluted on loss for the period	(4.6)p	(2.5)p	(1.7)p
8	Underlying profit before tax*
	Continuing	15.1	7.6	26.5
	Underlying earnings per share*
	Basic from continuing operations	4.4p	2.8p	9.6p
	Diluted from continuing operations	4.4p	2.8p	9.6p

 

* 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

(unaudited)

 

		6 months	6 months	12 months
		to	to	to
		30 June	30 June	31 Dec
		2010	2009	2009
Note		£m	£m	£m
	Loss for the period	(12.3)	(5.0)	(3.5)
12	Actuarial losses on retirement benefit obligations	(2.5)	(3.4)	(2.4)
	Exchange differences on retranslation of overseas net investments	44.1	(94.2)	(75.9)
	Exchange differences on net investment hedges	(7.4)	16.1	12.7
	Other comprehensive income / (loss) for the period	34.2	(81.5)	(65.6)
	Total comprehensive income / (loss) for the period - attributable to equity shareholders	21.9	(86.5)	(69.1)

 

Group statement of changes in equity

(unaudited)

 

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

 

for the 6 months to 30 June 2010

At 1 January 2010	74.9	269.7	-	145.9	89.3	(0.2)	579.6
Loss for the period	-	-	-	(12.3)	-	-	(12.3)
Other comprehensive income	-	-	-	(2.5)	36.7	-	34.2
Total comprehensive income	-	-	-	(14.8)	36.7	-	21.9
Share based payments	-	-	-	0.7	-	-	0.7
Vesting of LTIPs	-	-	-	(0.1)	-	0.1	-
Dividends paid	-	-	-	(6.7)	-	-	(6.7)
At 30 June 2010	74.9	269.7	-	125.0	126.0	(0.1)	595.5

 

for the 6 months to 30 June 2009

At 1 January 2009	49.9	269.7	-	113.4	152.5	(0.2)	585.3
Loss for the period	-	-	-	(5.0)	-	-	(5.0)
Other comprehensive loss	-	-	-	(3.4)	(78.1)	-	(81.5)
Total comprehensive loss	-	-	-	(8.4)	(78.1)	-	(86.5)
Share based payments	-	-	-	0.7	-	-	0.7
Vesting of LTIPs	-	-	-	(0.1)	-	0.1	-
Dividends payable	-	-	-	(14.0)	-	-	(14.0)
At 30 June 2009	49.9	269.7	-	91.6	74.4	(0.1)	485.5

 

for the 12 months to 31 December 2009

At 1 January 2009	49.9	269.7	-	113.4	152.5	(0.2)	585.3
Loss for the period	-	-	-	(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)
Transfers 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	-
Dividends paid	-	-	-	(14.0)	-	-	(14.0)
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

(unaudited)

 

		As at	As at	As at
		30 June	30 June	31 Dec
		2010	2009	2009
Note		£m	£m	£m
	Assets
	Non-current assets
	Property, plant and equipment	112.5	110.0	108.6
	Intangible assets	554.7	532.9	542.4
	Deferred tax assets	3.4	2.1	3.6
12	Retirement benefit assets	0.1	0.6	2.3
	Other non-current assets	2.0	0.9	1.8
		672.7	646.5	658.7
	Current assets
	Derivative financial instruments	-	0.3	-
	Inventories	59.3	56.8	49.6
	Trade and other receivables	128.4	105.9	121.0
	Income tax receivable	1.3	1.7	1.3
11(a)	Cash	48.2	58.0	53.7
		237.2	222.7	225.6
	Liabilities
	Current liabilities
11	Borrowings	(4.5)	(2.0)	(8.5)
	Derivative financial instruments	(0.8)	(0.8)	(0.8)
	Trade and other payables	(104.0)	(108.1)	(108.8)
	Current tax liabilities	(3.6)	(3.4)	(3.6)
	Provisions	(4.8)	(6.0)	(5.0)
		(117.7)	(120.3)	(126.7)
	Net current assets	119.5	102.4	98.9
	Non-current liabilities
11	Borrowings	(106.5)	(179.8)	(90.6)
	Income tax payable	(26.9)	(25.0)	(26.5)
	Deferred tax liabilities	(52.9)	(49.1)	(51.0)
12	Retirement benefit obligations	(4.8)	(3.8)	(4.8)
	Other non-current liabilities	(0.3)	(1.5)	(0.5)
	Provisions	(5.3)	(4.2)	(4.6)
		(196.7)	(263.4)	(178.0)
	Net assets	595.5	485.5	579.6
	Capital and reserves
	Equity share capital	74.9	49.9	74.9
	Share premium	269.7	269.7	269.7
	Retained earnings	125.0	91.6	145.9
	Translation reserve	126.0	74.4	89.3
	Treasury shares	(0.1)	(0.1)	(0.2)
	Total shareholders' equity	595.5	485.5	579.6

 

Group cash flow statement

(unaudited)

 

		6 months	6 months	12 months
		to	to	to
		30 June	30 June	31 Dec
		2010	2009	2009
Note		£m	£m	£m
10	Cash flows from operating activities
	Cash generated from operations	22.3	31.9	65.3
	Tax paid	(4.7)	(6.8)	(9.8)
	Net cash flows from operating activities	17.6	25.1	55.5
	Cash flow from investing activities
	Interest received	-	0.1	0.6
10	Acquisition of businesses (net of cash acquired)	-	(1.7)	(1.8)
	Purchase of property, plant and equipment	(8.4)	(8.3)	(17.1)
	Purchase of intangible assets (internally developed)	(4.8)	(5.6)	(11.1)
10	Outflow from sale of businesses	(0.5)	(0.6)	(2.6)
	Proceeds from sales of property, plant and equipment	-	-	0.7
	Net cash flows from investing activities	(13.7)	(16.1)	(31.3)
	Cash flows from financing activities
	Interest and other finance costs paid	(3.5)	(4.7)	(8.3)
	Net proceeds from issue of ordinary share capital	-	-	83.0
	Movement in treasury shares	-	-	(0.1)
	Increase / (decrease) in borrowings	4.1	12.0	(73.7)
	Dividends paid to shareholders	(13.8)	-	(14.0)
	Net cash flows from financing activities	(13.2)	7.3	(13.1)
	Effects of movements in foreign exchange rates	3.8	(5.2)	(4.3)
11(a)	(Decrease) / increase in cash and cash equivalents for the period	(5.5)	11.1	6.8
	Cash and cash equivalents brought forward	53.7	46.9	46.9
	Cash and cash equivalents carried forward	48.2	58.0	53.7

 

Notes to the Interim Report

(unaudited)

 

1 Authorisation of interim financial statements

 

The Group's interim financial statements for the period ended 30 June 2010 were authorised for issue by the Board of Directors on 28 July 2010. Laird PLC is a public limited company incorporated and domiciled in England and Wales and its ordinary shares are traded on the London Stock Exchange.

 

The comparative financial information for the period to 30 June 2009 and the year ended 31 December 2009 has been extracted from the published financial statements of Laird PLC. The consolidated interim financial information does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. These interim results are unaudited but have been reviewed by the Group's auditors. The statutory accounts for the year ended 31 December 2009 have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain the statements under section 498(2) or (3) of the Companies Act 2006.

 

Further copies of the Interim Report may be obtained from Laird PLC's registered office at 100 Pall Mall, London SW1Y 5NQ.

 

 

2 Basis of preparation

 

Laird PLC prepares its Annual Report and Accounts on the basis of IFRS as adopted for use by the EU. The financial information presented in this Interim Report has been prepared in accordance with the accounting policies expected to be used in preparing the 2010 Annual Report and Accounts which do not differ significantly from those used in the preparation of the 2009 Annual Report and Accounts. 

 

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and for this reason, they continue to adopt the going concern basis in preparing the financial statements of the Group.

 

The condensed set of financial statements included in this Interim Report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the EU.

 

 

3 Segmental analysis

 

	Performance Materials			Handset Products			Wireless Systems
	6	6	12	6	6	12	6	6	12
	months	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to	to
	30 June	30 June	31 Dec	30 June	30 June	31 Dec	30 June	30 June	31 Dec
	2010	2009	2009	2010	2009	2009	2010	2009	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue from customers	112.7	86.3	181.9	104.3	142.4	262.0	57.6	37.4	84.9
Segment profit before:	13.5	4.8	19.0	2.1	6.3	11.7	2.9	0.3	2.9
Amortisation of acquired intangible assets	(1.8)	(1.8)	(3.5)	(1.9)	(2.1)	(4.0)	(2.9)	(3.0)	(5.8)
Exceptional items	-	(0.8)	(2.6)	(18.0)	(0.8)	(4.3)	-	(1.8)	(3.3)
Operating profit / (loss)	11.7	2.2	12.9	(17.8)	3.4	3.4	-	(4.5)	(6.2)

 

							Total
							6	6	12
							months	months	months
							to	to	to
							30 June	30 June	31 Dec
							2010	2009	2009
							£m	£m	£m
Continuing operations
Revenue from customers							274.6	266.1	528.8
Segment profit before:							18.5	11.4	33.6
Amortisation of acquired intangible assets							(6.6)	(6.9)	(13.3)
Exceptional items							(18.0)	(3.4)	(10.2)
Operating (loss) / profit							(6.1)	1.1	10.1
Finance revenue							-	0.2	0.6
Finance costs							(3.7)	(4.1)	(7.8)
Financial instruments - fair value adjustments							-	1.9	1.6
Other net finance revenue - pension							0.3	0.1	0.1
(Loss) / profit before tax							(9.5)	(0.8)	4.6
Taxation							(2.8)	(3.2)	(6.2)
Loss for the period from continuing operations							(12.3)	(4.0)	(1.6)

 

Discontinued operations
Loss before tax on prior year disposals							-	(1.0)	(1.9)
Taxation							-	-	-
Loss for the period from discontinued operations							-	(1.0)	(1.9)

 

Loss for the period

(12.3)

(5.0)

(3.5)

 

	Performance Materials			Handset Products			Wireless Systems
	6	6	12	6	6	12	6	6	12
	months	months	months	months	months	months	months	months	months
	to	to	to	to	to	to	to	to	to
	30 June	30 June	31 Dec	30 June	30 June	31 Dec	30 June	30 June	31 Dec
	2010	2009	2009	2010	2009	2009	2010	2009	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Segment assets	389.5	353.6	368.9	292.7	293.7	297.5	212.1	193.6	201.1

 

							Total
							6	6	12
							months	months	months
							to	to	to
							30 June	30 June	31 Dec
							2010	2009	2009
							£m	£m	£m
Segment assets
Performance Materials							389.5	353.6	368.9
Handset Products							292.7	293.7	297.5
Wireless Systems							212.1	193.6	201.1
							894.3	840.9	867.5
Unallocated assets							15.6	28.3	16.8
Total assets							909.9	869.2	884.3

 

 

4 Exchange rates  

 

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

 

	Average			Closing
	6 months to	6 months to	12 months to	At	At	At
	30 June	30 June	31 Dec	30 June	30 June	31 Dec
	2010	2009	2009	2010	2009	2009
Czech Koruna	29.65	30.44	29.75	31.37	30.54	29.72
Euros	1.15	1.12	1.12	1.22	1.17	1.13
Japanese Yen	139.91	142.68	146.50	132.39	158.90	150.34
Renminbi ("RMB")	10.43	10.23	10.71	10.15	11.25	11.03
Swedish Krona	11.28	12.18	11.94	11.64	12.76	11.53
US Dollars	1.53	1.50	1.57	1.50	1.65	1.62

 

 

5 Exceptional items

 

	6 months to	6 months to	12 months to
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
Continuing operations:
Performance Materials
Property, plant and equipment write downs	-	-	(2.2)
Inventory write downs	-	(0.4)	(0.4)
Other restructuring costs	-	(0.4)	-
	-	(0.8)	(2.6)
Handset Products
Property, plant and equipment write downs	(3.7)	(0.1)	(1.2)
Intangible assets write downs	(14.3)	-	-
Inventory write downs	-	-	(0.2)
Other restructuring costs	-	(0.7)	(2.9)
	(18.0)	(0.8)	(4.3)
Wireless Systems
Intangible assets write downs	-	-	(0.6)
Inventory write downs	-	-	(0.6)
Other restructuring costs	-	(1.8)	(2.1)
	-	(1.8)	(3.3)
	(18.0)	(3.4)	(10.2)

 

Note

 

(a)	The exceptional costs in 2010 relate to the impairment of assets within Handset Products as a result of the decision to withdraw from the mechanisms product line subsequent to the period end.
(b)	The total cash outlay for exceptional costs in 2010 was £4.0m (June 2009, £4.8m).
(c)	The tax effect on exceptional items in 2010 is a £1.5m tax credit (June 2009, £0.2m).
(d)	Other restructuring costs include redundancy and site closure costs.

 

 

6  Discontinued operations

	6 months to	6 months to	12 months to
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
Loss on disposal of businesses:
Loss before tax on prior year disposals	-	(1.0)	(1.9)
Taxation	-	-	-
Loss after tax on disposals	-	(1.0)	(1.9)
Loss from discontinued operations	-	(1.0)	(1.9)

 

The loss from discontinued operations relates to warranty claims and other costs in respect of businesses sold in prior periods.

 

 

7  Earnings per share

 

The calculation of basic and diluted earnings per share is based on the loss for the period divided by the daily average of the number of shares in issue during the period. Diluted earnings per share is based on the same loss 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.

 

	6 months to	6 months to	12 months to
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
Loss
Loss after tax from continuing operations	(12.3)	(4.0)	(1.6)
Result from discontinued operations	-	(1.0)	(1.9)
Loss for the period	(12.3)	(5.0)	(3.5)
	Number	Number	Number
	of shares	of shares	of shares
		(restated)
	(m)	(m)	(m)
Weighted average shares
Basic weighted average shares	266.2	204.5	211.6
Options	1.4	0.1	0.5
Diluted weighted average shares*	267.6	204.6	212.1
	Pence	Pence	Pence
Earnings per share
Basic from continuing operations	(4.6)	(2.0)	(0.8)
Diluted from continuing operations	(4.6)	(2.0)	(0.8)
Basic from discontinued operations	-	(0.5)	(0.9)
Diluted from discontinued operations	-	(0.5)	(0.9)
Basic on loss for the period	(4.6)	(2.5)	(1.7)
Diluted on loss for the period	(4.6)	(2.5)	(1.7)

 

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

 

 

8 Underlying results and taxation

 

Underlying profit and earnings per share are shown as the Board considers them to be relevant guides to the performance of the Group.

 

	6 months	6 months	12 months
	to	to	to
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
Profit
Continuing operating profit before amortisation of acquired intangible assets and exceptional items	18.5	11.4	33.6
Finance revenue	-	0.2	0.6
Finance costs	(3.7)	(4.1)	(7.8)
Other finance revenue - pension	0.3	0.1	0.1
Continuing underlying profit before tax	15.1	7.6	26.5
Discontinued operating profit before amortisation of acquired intangible assets and exceptional items	-	-	-
Total underlying profit before tax	15.1	7.6	26.5
Tax
The underlying tax charge is calculated as follows:
Underlying tax on continuing operations	3.3	1.9	6.2
Underlying tax on discontinued operations	-	-	-
Total underlying tax	3.3	1.9	6.2
Continuing underlying tax rate	21.9%	24.9%	23.4%
Tax relief on exceptional items	(1.5)	(0.2)	(1.8)
Deferred tax on goodwill and acquired intangible assets	1.0	1.5	1.8
Total tax charge	2.8	3.2	6.2
Analysis of tax charge:
Tax on profit from continuing operations	2.8	3.2	6.2
Tax on discontinued operations	-	-	-
Total tax charge	2.8	3.2	6.2
Earnings per share	Pence	Pence	Pence
Continuing underlying earnings per share - basic	4.4	2.8	9.6
Continuing underlying earnings per share - diluted	4.4	2.8	9.6

 

The tax charge for the period has been based on the estimated tax rate for the full year and the amount of overseas tax charged in the period was £2.8m (June 2009, £3.2m, December 2009, £6.2m).

 

 

9 Dividends paid and proposed

 

On 28 July 2010 the Board declared an interim dividend of 2.1p per share (2009, 3.47p). The interim dividend will be paid on 3 December 2010 to shareholders registered on 5 November 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.

 

Total Dividends	Dividends paid			Dividends declared / proposed*
	6 months	6 months	12 months	6 months	6 months	12 months
	to	to	to	to	to	to
	30 June	30 June	31 Dec	30 June	30 June	31 Dec
	2010	2009	2009	2010	2009	2009
	£m	£m	£m	£m	£m	£m
Final 2008	-	-	14.0	-	-	-
Interim 2009	7.1	-	-	-	7.1	7.1
Final 2009	6.7	-	-	-	-	6.7
Interim 2010	-	-	-	5.6	-	-
	13.8	-	14.0	5.6	7.1	13.8

 

 

Dividends per share	Dividends paid			Dividends declared / proposed*
	6 months	6 months	12 months	6 months	6 months	12 months
	to	to	to	to	to	to
	30 June	30 June	31 Dec	30 June	30 June	31 Dec
	2010	2009	2009	2010	2009	2009
	Pence	Pence	Pence	Pence	Pence	Pence
Final 2008		-	6.84	-	-	-
Interim 2009	3.47	-	-	-	4.00	3.47
Final 2009	2.53	-	-	-	-	2.53
Interim 2010	-	-	-	2.1	-	-
	6.00	-	6.84	2.1	4.00	6.00

 

* attributable to the period

 

 

10 Additional cash flow information

 

Cash generation from operations

 

Continuing operations	6 months	6 months	12 months
	to	to	to
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
Loss after taxation	(12.3)	(4.0)	(1.6)
Depreciation and other non-cash items
Depreciation	9.1	8.2	16.7
Amortisation of capitalised development costs	4.3	2.3	5.6
Exceptional property, plant and equipment write downs	3.7	0.1	3.4
Exceptional intangible assets write downs	14.3	-	0.6
Exceptional inventory write downs	-	0.4	1.2
Share based payments	0.7	0.7	1.6
Amortisation of acquired intangible assets	6.6	6.9	13.3
Financial instruments - fair value adjustments	-	(1.9)	(1.6)
Pension charges	0.2	0.2	0.4
Other net finance costs	3.4	3.8	7.1
Taxation	2.8	3.2	6.2
Pension contributions	(0.2)	(0.2)	(0.2)
Changes in working capital
Inventories	(6.2)	14.1	22.0
Trade and other receivables	0.8	7.6	(5.1)
Trade, other payables and provisions	(4.9)	(9.5)	(4.3)
	(10.3)	12.2	12.6
Cash generated from continuing operations	22.3	31.9	65.3
Discontinued operations
Loss after taxation	-	(1.0)	(1.9)
Loss on disposal of businesses before taxation	-	1.0	1.9
Cash flow from discontinued operations	-	-	-
Cash generated from operations	22.3	31.9	65.3

 

Changes in working capital from continuing operations are after creditor decreases of £4.0m (June 2009, £1.9m) in respect of exceptional costs of redundancy and restructuring.

 

 

10 Additional cash flow information (continued)

 

Net cash outflow on acquisitions and disposals

 

	6 months	6 months	12 months
	to	to	to
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
Acquisition of businesses
Consideration:
Deferred consideration paid	-	(1.7)	(1.8)
Net cash outflow on acquisition of businesses	-	(1.7)	(1.8)
Disposal of businesses
Consideration:
Net cash consideration
Prior year disposals	(0.5)	(0.6)	(2.6)
Net cash outflow on disposal of businesses	(0.5)	(0.6)	(2.6)

 

11 Borrowings

 

(a) Reconciliation of net borrowings

 

	At	At	At
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
(Decrease) / increase in cash and cash equivalents (net of bank overdrafts)	(5.5)	11.1	6.8
Movement in borrowings	(4.1)	(12.0)	73.7
Differences on exchange on borrowings	(7.8)	16.6	13.6
Movement in net borrowings during the period	(17.4)	15.7	94.1
Net borrowings brought forward	(45.4)	(139.5)	(139.5)
Net borrowings carried forward	(62.8)	(123.8)	(45.4)
Cash and cash equivalents (net of bank overdrafts)	48.2	58.0	53.7
Current borrowings	(4.5)	(2.0)	(8.5)
Non-current borrowings	(106.5)	(179.8)	(90.6)
Net borrowings carried forward	(62.8)	(123.8)	(45.4)

 

(b) Committed borrowing facilities

 

The Group had total committed loan facilities of £367.3m at 30 June 2010 (June 2009, £358.0m), of which £360.8m (June 2009, £354.0m) was available for more than two years and £111.0m was drawn at 30 June 2010 (June 2009, £182.3m). Committed facilities include £2.0m (June 2009, £2.0m) of promissory notes issued to third parties in part satisfaction of acquisition consideration.

 

 

12 Retirement benefit obligations

 

A review of the main assumptions affecting the Group's defined benefit obligations was carried out at 30 June 2010, by the Group's actuary.

 

The expected long term rates of return on gilts and bonds are estimated at 4.7% per annum (December 2009, 4.7%) and those for equities at 8.2% per annum (December 2009, 8.2%).

 

The mortality assumption used at 30 June 2010 is the same as that used at 31 December 2009. This is based on 92 series tables with an allowance for improvements in line with the medium cohort based on each member's year of birth, subject to a minimum level of future improvement of 1.5%. Executive and director members have an age rating of -1 years and all other members have an age rating of +2 applied to the base table.

 

For IAS 19 the schemes' liabilities have been calculated under the projected unit method and the main financial assumptions were inflation of 3.5% per annum (December 2009, 3.8%), salary increases of 4.5% to 5.5% per annum (December 2009, 4.8% to 5.8%) and a discount rate for liabilities of 5.3% per annum (December 2009, 5.65%).

 

The change in the overall net (deficit) / surplus and the impact of these changes can be seen below:

 

	6 months	6 months	12 months
	to	to	to
	30 June	30 June	31 Dec
	2010	2009	2009
	£m	£m	£m
Defined benefit net (deficit) / surplus at period start	(2.5)	0.1	0.1
Net pension income / (expense)	0.1	(0.1)	(0.3)
Employer contributions	0.2	0.2	0.3
Actuarial loss	(2.5)	(5.4)	(4.4)
Plan termination	-	-	(0.2)
Insurance proceeds	-	2.0	2.0
Defined benefit net (deficit) / surplus at period end	(4.7)	(3.2)	(2.5)

 

The charge of £2.5m (June 2009, £5.4m) recognised in the statement of comprehensive income for the period is comprised of the £3.7m (June 2009, £7.0m) loss recognised on actuarial assumptions, less £1.2m (June 2009, £1.6m) in respect of tax previously provided on surpluses.