Half Yearly Report

30th Jul 2009 07:00



LAIRD PLC

RESULTS FOR THE SIX MONTHS TO 30 JUNE 2009

(unaudited)

	6 months	6 months	12 months
	to 30 June	to 30 June	to 31 Dec
	2009	2008	2008
	£m	£m	£m
Revenue from continuing operations	266.1	315.0	635.3
Underlying profit before tax from continuing operations (i)	7.6	34.5	60.6
Profit / (loss) before tax from continuing operations	(0.8)	29.1	26.5
Operating cash flow from continuing operations	22.8	28.1	48.1
Net borrowings	123.8	94.4	139.5
Shareholders' funds	485.5	459.0	585.3
	p/share	p/share	p/share
Underlying earnings from continuing operations (i)	3.2	15.9	27.4
Basic earnings from continuing operations	(2.3)	12.6	8.1
Dividend	4.0	4.0	11.88

Peter Hill, Chief Executive, said:

"Trading conditions have, as expected, proved to be very challenging during the first half of 2009. The difficult macroeconomic conditions, together with the downturn in consumer electronics markets, have been exacerbated by destocking in the global supply chain. Although demand has stabilised since the start of the year, we have yet to see any signs of a sustained recovery.

We have taken actions to match our operations and our cost base to the new levels of demand, focusing on cash generation and best serving our customers, while maintaining our investment in new product development. We expect to see some pick-up in activity in the second half of the year as a result of new programme awards and some replenishment of inventories in the global supply chain, and also expect to see additional benefits to come from our cost reduction actions. We believe that the fundamentals of our markets remain attractive, and that we will be well positioned as these markets return to growth."

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

Summary

	Results impacted by the global economic downturn and associated de-stocking in the global supply chain, seen in the second half of 2008 and which has continued into 2009. Trading environment remained challenging throughout the first half of this year, compared with the strong growth in revenue and profits reported for the first half of 2008.
	Actions taken to reposition Laird to operate successfully in the current economic and market environment:
	-	operating costs reduced; further manufacturing and support functions being migrated to low cost locations
	-	direct labour costs reduced by 37% in line with revenues
	-	overheads reduced by $42 million (£28 million) in the period compared with the first half of 2008, while still maintaining engineering and R&D spend.
	Underlying profit before tax from continuing operations down 78% at £7.6 million (2008, £34.5 million), largely as a result of lower volumes in 2009 offset partially by cost reductions.
	Tight control of cash: operating cash flow after capital expenditure from continuing operations of £22.8 million (2008, £28.1 million). Operating cash conversion after capital expenditure from continuing operations of 200% (2008, 74%).
	Operated well within covenants at the half year:
	-	debt facilities in place with maturities from 2012 to 2016.
	Interim dividend of 4.0 pence per share (2008, 4.0 pence).

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 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.

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: we provide technology for a connected world.

The sustained upheaval in the global economy, with its associated credit pressures, reductions in consumer spending and currency volatility, continues to impact our global electronics markets. We have taken prompt actions to reposition our business to operate in the changed economic and market environment, and have implemented an extensive programme of restructuring and cost reductions. We have continued to invest in maintaining our technical and operational capabilities and increasing our customer penetration, while also taking the necessary actions to maintain our competitive position.

The principal elements of our strategy remain in place, and we are confident of our ability to weather the downturn and emerge as a stronger company, essential to our customers' needs.

RESULTS

As previously reported, our business has been affected by the challenging macroeconomic conditions and supply chain destocking, first seen in the second half of 2008 and which have continued through the first half of this year. We have also experienced the effect of market share loss by certain key customers in their own end user markets, a more extensive price down environment than has been experienced hereto, bankruptcy filings in the automotive sector, and some changes in product mix and market shares within our Handset Products Division.

Revenue from continuing operations in the six months to June 2009 was £266.1 million, down 16% (2008, £315.0 million). Like-for-like revenues in the period declined by 36% on a constant currency basis, compared with the very strong first half of 2008 (growth of 19%). All three of our Divisions were affected by the lower demand.

Comparable revenues in the second quarter of 2009 were 7% below those in the first quarter. The reductions were in our Wireless Systems Division (as a result of the General Motors and Chrysler bankruptcies which have now been resolved) and in our Handset Products Division. The latter was partly as a result of a strong end to the first quarter where there was evidence of some temporary restocking. In addition, despite higher unit shipments compared to the first quarter, there were product mix changes and the effect of price reductions occurring in advance of material cost reductions.

Underlying operating profit from continuing operations was £11.4 million in the first half of 2009, down 70% (2008, £37.9 million). Our underlying profit margin percentage, before interest and tax, in the six months to 30 June 2009 was 4.3% (2008, 12.0%).

We have been proactive in protecting profitability despite the significant reduction in revenues. We have reduced our manufacturing capacity, closed or downsized a number of facilities and continued with a programme to migrate manufacturing and support functions to the lowest cost locations. On a like-for-like basis, our direct labour costs in the first half were 37% lower than in the first half of 2008, against a reduction in revenues on the same basis of 36%. Direct overheads were 26% lower, offsetting an increase in materials costs as a percentage of revenues. As a result, gross margin in the first half of 2009 was held at 29% (2008, 33%).

We have largely maintained our engineering and R&D activity, and have begun to see the benefits from relocating a proportion of this activity to lower cost regions. Engineering and R&D as a percentage of sales, on a like-for-like basis, increased as a result of the lower revenues to 7.6% after capitalised development (2008, 5.2%).

We have also taken action to reduce our Selling, General and Administration ("S,G&A") costs significantly, although despite being 29% less than in 2008, these have increased to 16.9% of revenues on a like-for-like basis (2008, 15.2%) as a result of the lower revenues. Taken together, direct overheads and S,G&A costs were $42 million (£28 million) lower than in the first half of 2008. Additional cost reductions, resulting from the actions we have taken, of $13 million (£8 million) are expected in the second half.

Underlying profit before tax from continuing operations was £7.6 million in the six months to June 2009, down 78% (2008, £34.5 million).

Exceptional costs from continuing operations of £3.4 million are as a result of our restructuring actions to reduce capacity and headcount. Further actions are being implemented in the second half of the year, which are currently expected to result in an additional charge similar to that in the first half.

Statutory profit before tax from continuing operations in the six months to June 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 a loss of £0.8 million (2008, profit of £29.1 million).

We have successfully reduced working capital in the period in line with demand and our actions to tightly manage cash have resulted in a healthy operating cash flow despite the significant fall in profits.

Operating cash flow from continuing operations after capital expenditure in the six months to June 2009 was £22.8 million (2008, £28.1 million). Our focus on cash generation resulted in operating cash conversion after capital expenditure increasing to 200% in the period compared with 74% in 2008. Capital expenditure in the period was £8.3 million (2008, £16.2 million), slightly higher than depreciation, and was predominantly on new equipment to enhance our technology capabilities and provide advanced new products, as well as to increase the level of vertical integration to improve margins and for specific customer programmes.

Net borrowings at the end of June 2009 were £123.8 million, down from the £139.5 million at 31 December 2008.

Underlying earnings per share from continuing operations were 3.2 pence (2008, 15.9 pence), reflecting the lower profits and, as expected, a higher tax rate.

DIVIDEND

The Board has declared an interim dividend of 4.0 pence per share (2008, 4.0 pence).

STRATEGIC DEVELOPMENT

On a like-for-like basis we have maintained our investment in technology development and R&D. This investment has been instrumental in delivering the new programme wins which have been key to maintaining our sales at the levels we have achieved, in delivering the new customer wins where we are just starting to see the benefits, and in supporting our customers with their new designs from which we expect to benefit in 2010 onwards. More details are given in the Divisional sections. We aim to be the technology leader in our industries, creating and preserving the ability to offer the most innovative solutions to our customers.

We are enhancing our competitive edge, repositioning manufacturing, engineering, and support functions to the lowest cost locations while maintaining the highest levels of customer service: some 85% of revenues by origin in the first half of 2009 were from low cost countries. The proportion of our sales by destination to emerging markets has also increased, to 63% in the half year compared with 58% in the same period in 2008.

During the downturn we are also researching, and evaluating opportunities in new and complementary markets and technologies, into which we can expand when market and economic conditions improve.

HANDSET PRODUCTS DIVISION

Six months to 30 June	2009	2008
	£m	£m
Revenue	142.4	170.1
Underlying operating profit	6.3	19.3
Return on sales	4.4%	11.3%

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 decorative metals.

Divisional revenues decreased 16% in the first half of 2009 to £142.4 million. Like-for-like revenues in the period declined by 37% on a constant currency basis (2008, growth of 23%). The Division accounted for 54% of Laird's total revenues in the half year.

Cellular antennae products contributed 62% of Divisional revenues, actuation mechanisms 20% and handset metals, including BLS, 18%.

Compared to the exceptionally strong first half of 2008, we saw a considerable reduction in the demand for our mobile device products due to the general market decline and the effect of market share loss by certain key customers in their own end user markets. We have also seen a more extensive price down environment than has been experienced hereto, leading in addition to some market share loss in the period which we expect to regain once demand improves. In addition, we were affected by certain higher priced programmes going end of life.

In the latter part of the year we responded rapidly to the slowdown and took immediate actions to align our capacity and cost to the new market conditions, where industry observers expect global unit handset shipments to decline by at least 10% in 2009 compared with 2008.

Our customers include all the "top 5" global Original Equipment Manufacturers ("OEMs"): Nokia, Samsung, LG, Motorola and Sony Ericsson, as well as Apple, RIM and Palm together with Asian Original Design Manufacturers ("ODMs") and OEMs such as Huawei and HTC.

 

We supply a wide range of products, including both cellular and non-cellular antennae utilising surface mount technology, BLS metals and structural metals products, as well as different mechanisms products, predominantly sliders and camera shutters. Based on customer input, we believe we continue to maintain our industry technology leadership position in cellular antennae. In handset BLS and mechanisms we have seen a move to consolidate the manufacturing of a proportion of these products with large contract manufacturers. We are developing new products and re-aligning our customer service approach, both with OEMs and with the contract manufacturers themselves, and believe that as a result we will again be able to re-grow our share. We have been successful in broadening our customer base, particularly with "non traditional" customers, and have achieved market share gains.

The Division's underlying operating profit fell 67% in the first half of the year to £6.3 million (2008, £19.3 million). Return on sales fell to 4.4% (2008, 11.3%). 

Margins have declined largely as a result of the much reduced revenues. We have reduced direct labour costs in line with revenues and held materials margins, offsetting price reductions with reductions in our own costs, through improved efficiency in our production, reduced component costs and increased vertical integration. Although direct overheads and S,G&A costs have been reduced significantly, costs as a percentage of sales have still increased. We expect margins to improve both as a result of further structural reductions in the cost base, and when revenues recover.

The transfer of production from our now closed Hungarian factory, as well as the relocation of production from our factories in the Czech Republic and Mexico to Asia, has been successfully completed, and overheads reduced.

We have successfully installed new technology capabilities to allow us to offer a broader and more innovative range of products to our mobile device customers. These include laser directed structuring ("LDS") a method of applying three dimensional antennae patterns onto a plastic carrier using an advanced laser system, a unique combination of mechanical sliders containing embedded antennae and in-house plastic moulding, allowing us greater control of the design and manufacturing processes, together with the ability to offer greater flexibility and reduced lead times to our customers.

With our broad and technically advanced product portfolio we are well positioned to benefit from the increasing proportion of "smartphones" in the cellular marketplace. We are also expanding our product portfolio with advanced antennae solutions for the emerging mobile Broadband PC market. These will enable enhanced performance for 3G, 4G and advanced Radio Frequency ("RF") for Notebooks, Netbooks and mobile internet devices. The key OEMs and ODMs have shown great interest in our technology portfolio.

We continue our investment in engineering and during the first half of 2009 have increased our focus and investments in our Korean and Taiwanese design facilities. We have taken steps to position ourselves as the technology leader in products supporting Long Term Evolution/4G ("LTE") handsets and are investing accordingly. Laird's award winning Activv™ FM radio product has been released in the first phone on the market, with great interest from the major OEMs.

We have an increasingly broad and competitive technology and product portfolio and are pursuing opportunities with new customers, both within our traditional and non traditional market areas. At the same time we are focusing on technology leadership, while increasing the extent of our vertical integration to improve margins. All of these initiatives are designed to broaden our customer offering to ensure the Division is well placed when markets recover.

PERFORMANCE MATERIALS DIVISION

Six months to 30 June	2009	2008
	£m	£m
Revenue	86.3	96.8
Underlying operating profit	4.8	13.7
Return on sales	5.6%	14.2%

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 decreased by 11% in the first half of 2009 to £86.3 million. Like-for-like revenues declined by 31% on a constant currency basis (2008, growth of 10%), as a result of reduced demand for our thermal and EMI products, some market share loss in signal integrity products, and price reductions in certain sectors.

EMI shielding materials provided 65% of Divisional revenues in the period, thermal management solutions 26% and signal integrity products 9%.

By market segment, 46% of the Division's revenues were to the IT, telecommunications and Datacomm sectors, with the balance to the consumer electronics, industrial and instrumentation, medical, and aerospace and defence markets.

The Division has performed well in terms of maintaining or increasing market share, and is winning new customer business, albeit with total revenues well down on 2008 as a result of the global recession.

EMI and Thermal sales into the IT, Datacom and Telecom industries continued to perform well despite the difficult markets, particularly in respect of telecom infrastructure for new base stations in Asia. EMI sales into the flat screen TV segment have also performed creditably. We have been successful in winning new business in the military market, with sales to Lockheed Martin and Northrop Grumman ramping up in the first half. Other new wins have been for LED lighting, with Philips in the medical sector, and in board level solutions with Garmin and Lorentz for portable GPS applications.

Signal Integrity Products ("SIP") maintained its positions with its traditional customers in the challenging printer segment, and has won business with new customers. However, signal integrity revenues overall have declined, and we are re-engineering its product portfolio to be more competitive while at the same time strengthening the sales force. 

Underlying operating profit fell 65% in the first half to £4.8 million (2008, £13.7 million). Return on sales in the Division fell from 14.2% in the first half of 2008 to 5.6% in the first half of 2009. The Division's margins suffered as a result of the reduced revenues, despite a significant reduction in overhead costs. Materials as a percentage of sales also increased, largely as a result of changes in product mix, and we experienced more severe price erosion than expected in some areas of EMI shielding and in SIP. However, with the actions we are taking and a return to growth in demand we expect margins to recover.

Operationally, we completed the closure of our EMI shielding plant in Pennsylvania, USA, at the beginning of the year, and have expanded the Division's manufacturing footprint in Mexico and China. We are also ramping down the majority of thermal products manufacturing at our Cleveland, USA, facility, and product transfers to China are currently taking place. Other manufacturing locations are being consolidated to match capacity to current demand, as well as to reduce overheads and discretionary spend.

We have introduced our new EMI Sentry™ family of EMI form in place gaskets in the first half; these offer greater adhesion and strength, and greater reliability with heat/humidity resistance that is ideal for handsets and base stations, as well as for the consumer electronics industry more generally.

We have introduced a number of new EMI elastomer products, expanding our offering for telecom infrastructure uses. New thermal gap filler, phase change, coolers and printed circuit board products have also been introduced, as well as new families of ferrites and chip beads in our Signal Integrity business; all of these are attracting high levels of customer interest.

The higher speed, power and performance of electronic devices will underpin demand for our Performance Materials Division's products, and we are maintaining our emphasis on the development of higher performance products to better differentiate us from our competitors, and to expand our customer base. 

WIRELESS SYSTEMS DIVISION

Six months to 30 June	2009	2008
	£m	£m
Revenue	37.4	48.1
Underlying operating profit	0.3	4.9
Return on sales	0.8%	10.2%

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

Divisional revenues declined by 22% in the first half of 2009 to £37.4 million (2008, £48.1 million). Like-for-like revenues in the period declined by 41% on a constant currency basis (2008, growth of 24%).

Telematics antennae modules into the automotive market provided 53% of Divisional revenues, the infrastructure, datacomm, security and asset management sectors 38%, and wireless M2M modules 9%.

Our telematics antennae business suffered particularly in the first half of 2009, both as a result of the general downturn in the automotive markets and as a result of the bankruptcy filings of General Motors and Chrysler, where we hold market leading positions. The bankruptcies have now been resolved and we expect revenues to pick up again in the second half.

In infrastructure antennae, we saw a slowdown across all our market segments. However, we are expanding our sales infrastructure outside North America, and have begun to see some success of this strategy with infrastructure antennae wins in China and South East Asia, and for WiMax in India.

The Division's underlying operating profit fell to £0.3 million in the first half, (2008, £4.9 million). Return on sales fell from 10.2% in the first half of 2008 to 0.8% in the first half of 2009. The bankruptcies of Chrysler and General Motors resulted in unrecovered overheads during the bankruptcy, despite significant reductions elsewhere, as a result one-off losses of some £3 million will have been incurred. Materials costs were up in the period largely due to adverse mix. Structural cost reductions are underway in Telematics, and the US automotive bankruptcies have been resolved: these factors, together with a return to growth in demand when it occurs, will result in a significant improvement in margins compared with the first half.

Operationally, we are in the final phase of closing manufacturing in Manchester, New Hampshire, USA, consolidating our North American production in one location and with other production being transferred to Malaysia and China. Our facility space in Illinois, USA is also being downsized, overheads across the Division are being reduced, our engineering resources in our telematics area are being reduced in line with expected market demand, and our wireless M2M engineering is being progressively relocated from the US and UK to India.

The Division has utilised the downturn to focus on product re-engineering, to best position it for market recovery. Initiatives include a new convergence GPS/Cellular/WiFi antenna family to support long haul fleet management, dualband MIMO internal antennae family to enhance the latest generation of wireless LAN technology systems, the next generation "Stealth II" GPS, a self contained GPS and cellular-based tracking device, and new "Zigbee" wireless M2M modules for industrial automation and remote meter reading.

We are enhancing our technology capabilities, while broadening our customer base and our market and geographic presence. We believe that these actions will position the Division for a return to growth as economic conditions recover.

OUTLOOK

Trading conditions have, as expected, proved to be very challenging during the first half of 2009. The difficult macroeconomic conditions, together with the downturn in consumer electronics markets, have been exacerbated by destocking in the global supply chain. Although demand has stabilised since the start of the year, we have yet to see any signs of a sustained recovery.

We have taken actions to match our operations and our cost base to the new levels of demand, focusing on cash generation and best serving our customers, while maintaining our investment in new product development. We expect to see some pick-up in demand in the second half of the year as a result of new programme awards and some replenishment of inventories in the global supply chain, and also expect to see additional benefits to come from our cost reduction actions. We believe that the fundamentals of our markets remain attractive, and that we will be well positioned as these markets return to growth.

Nigel Keen	Peter Hill
Chairman	Chief Executive

29 July 2009

FINANCE DIRECTOR'S REPORT 

REVISION TO SEGMENTS

In 2008, Laird changed its organisational structure from two Divisions, namely Antenna & Wireless Systems and Electronic Components & Systems, to three Divisions; Handset Products, Performance Materials and Wireless Systems, with the resultant segmental reporting adopted in the 2008 Accounts and in this Half Year report.

REVENUE

Revenue from continuing operations fell by 16% to £266.1 million in 2009 (2008, £315.0 million). 

Organic growth from continuing operations is measured by restating 2009 revenue at 2008 exchange rates and comparing it to the reported revenue for 2008 but after adjusting 2008 on to a pro-forma basis. The pro-forma adjustment is the addition of revenue in respect of acquisitions as if we had owned the acquisitions in 2008 for the same proportion of the year that they were owned in 2009. There was a negligible impact from acquisitions in this reporting period.

On this basis, organic growth was negative for all three Divisions as set out in the table below. 

	Handset	Performance	Wireless
	Products	Materials	Systems	Total
	£m	£m	£m	£m
2008 revenue	170.1	96.8	48.1	315.0
Adjustment for acquisitions in 2008	-	-	0.6	0.6
2008 pro-forma revenue	170.1	96.8	48.7	315.6
2009 revenue	142.4	86.3	37.4	266.1
Adjustment to restate at constant exchange rates	(34.6)	(19.3)	(8.6)	(62.5)
2009 revenue at 2008 exchange rates	107.8	67.0	28.8	203.6
Organic growth	(36.6)%	(30.8)%	(40.9)%	(35.5)%

NET MARGINS

Net margins were 4.3% in 2009 (2008, 12.0%). Margins by segment are summarised below. 

	First Half	First Half	Full Year
£m	2009	2008	2008
Handset Products
Revenue	142.4	170.1	348.7
PBIT	6.3	19.3	37.4
ROS%	4.4%	11.3%	10.7%
Performance Materials
Revenue	86.3	96.8	190.9
PBIT	4.8	13.7	23.1
ROS%	5.6%	14.2%	12.1%
Wireless Systems
Revenue	37.4	48.1	95.7
PBIT	0.3	4.9	8.0
ROS%	0.8%	10.2%	8.4%

UNDERLYING PROFIT

Continuing underlying profit before tax in the half year was £7.6 million (2008, £34.5 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. 

PROFIT / LOSS

There was a loss before tax from continuing operations of £0.8 million (2008, profit before tax of £29.1 million). There was a loss from discontinued operations of £1.0 million relating to warranty claims on businesses sold in prior periods. 

EXCEPTIONAL COSTS

The steps taken to reduce headcount and capacity as a result of the lower levels of activity have resulted in £3.4 million of exceptional costs in 2009 (2008, £nil for the half year and £20.3 million in the full year from continuing operations) of which £0.5 million is non-cash. Note 5 analyses these costs by Division. Further actions will be implemented in the second half of the year and these are currently expected to result in a similar charge to that in the first half. The cash outlay in the first six months was £4.8 million (£4.4 million of which was accrued in 2008) with a further expected cash outlay of £9.0 million to come in 2009 and £4.5 million in 2010.

FINANCE COSTS

Finance costs, excluding a gain on the fair valuing of financial instruments of £1.9 million (2008, loss of £2.4 million), were £3.8 million compared to £3.4 million in 2008. Interest cover was 4.4 times, above 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 24.9%, higher than the 18.3% in 2008, with increases due to less tax incentives and higher corporate tax rates in China. In addition, lower profits in the USA will result in tax allowances for amortised goodwill not being fully utilised in the period. There is also an element of the tax charge relating to withholding tax in foreign jurisdictions which is largely fixed and is therefore proportionally more significant on lower profits. If profits were to rise going forward then this ought to lead to a lower average tax rate.

UNDERLYING EARNINGS PER SHARE

Continuing underlying earnings per share of 3.2p were well below the 15.9p achieved in 2008 (note 8). Underlying earnings are based on underlying profit less underlying tax and exclude deferred tax on acquired intangible assets and goodwill.

EARNINGS PER SHARE

Basic earnings per share were (2.8)p (2008, 12.6p).

CASH FLOW

Analysis of cash flow	2009
	£m
Operating profit	11.4
Depreciation/amortisation of capitalised development	10.5
Other non-cash	0.7
	22.6
Reduction in working capital*	14.1
Capitalised development costs	(5.6)
Capital expenditure	(8.3)
Operating cash flow	22.8
Finance costs	(4.6)
Taxation	(6.8)
Trading cash flow surplus	11.4
Dividends	-
Acquisitions/disposals	(2.3)
Exceptional costs	(4.8)
Reduction in net borrowings before exchange movement	4.3
Exchange translation movement	11.4
Reduction in net borrowings	15.7

* after adjusting for creditor decreases on exceptional items of £1.9 million.

There was a working capital reduction of £14.1 million. Although both trade receivables and trade payables were lower (in constant currency) the working capital reduction is accounted for by the reduction in inventories. 

FOREIGN EXCHANGE MANAGEMENT

The Group aims to minimise its exposures to 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 partially hedge the currencies of our principal assets and cash flows. Where foreign currency borrowings match with our investment in overseas assets they are treated as a hedge of the net investment.

NET BORROWINGS AND DEBT FACILITIES

Overall, net borrowings fell by £15.7 million to £123.8 million; £11.4 million of the reduction reflects a stronger pound impacting the translation of foreign currency borrowings (largely US Dollar denominated).

A cornerstone of Laird's financial planning is to ensure that the Group maintains committed loan finance which exceeds expected borrowing requirements and has a significant proportion with terms that exceed one year. Laird has £265 million of bilateral revolving credit facilities which do not expire until August 2012. In addition, Laird has in issue $150 million (£91 million) of US Dollar Private Placement notes which are repayable between 2010 to 2012 ($10 million), 2014 ($97 million) and 2016 ($43 million). In total, Laird has £356 million of committed loan finance, all in excess of 3 years.

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 2009, net borrowings were 2.4 times EBITDA, 68% of the maximum permitted of 3.5 times. Interest cover was 4.4 times, in excess of the minimum requirement of 2.5 times. 

CURRENCIES IN 2009 

The average and period end exchange rates are set out in note 4. In 2009, almost 90% of revenues (and almost 70% of costs) were in US Dollars and Renminbi with a further 10% in Euros. 

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. Other than the Renminbi and the Euro, these currencies accounted for some 19% of our operating costs in the first six months of this year, largely represented by Japanese Yen, Swedish Krona, Korean Won and Czech Koruna. In 2009, the US Dollar (our effective operating currency in which we generate a large surplus) appreciated against these currencies having a beneficial impact compared with the previous year.

In addition, there is a translation impact in converting profits into our reporting currency (the Pound); each US$0.01 appreciation against sterling approximates to an annual increase in operating profit of £300,000. 

The majority of the Group's assets are held overseas and these are hedged in part by foreign currency loans. The translation impact of exchange rate movements at 30 June 2009 compared with 31 December 2008 was substantial given the movement in exchange rates and reduced shareholders' funds by £78.1 million.

PRINCIPAL RISKS

Laird operates globally in varied markets. The principal risks and uncertainties that are or may be faced are disclosed in the 2008 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 2008 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 2009 was £485.5 million (31 December 2008, £585.3 million) with exchange differences on translation reducing equity by £78.1 million (31 December 2008, an increase of £149.2 million). The reconciliation is set out in the Group statement of changes in equity. 

Jonathan Silver

Finance Director

29 July 2009

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 1-15 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 2009 and their respective responsibilities are set out in the Laird PLC 2008 Annual Report.

By Order of the Board:

P J Hill, Chief Executive

J C Silver, Finance Director

29 July 2009

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 2009 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 13. 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 2009 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

29 July 2009

Group income statement

(unaudited)

		6 months	6 months	12 months
		to	to	to
		30 June	30 June	31 Dec
		2009	2008	2008
		£m	£m	£m
Note
	Continuing operations
3	Revenue	266.1	315.0	635.3
	Operating profit before amortisation of acquired intangible assets and exceptional items	11.4	37.9	68.5
	Amortisation of acquired intangible assets	(6.9)	(5.5)	(11.4)
5	Exceptional items	(3.4)	-	(20.3)
	Operating profit	1.1	32.4	36.8
	Finance revenue	0.2	0.3	0.5
	Finance costs	(4.1)	(4.3)	(9.6)
	Financial instruments - fair value adjustments	1.9	0.1	(2.4)
	Other net finance revenue - pension	0.1	0.6	1.2
	(Loss) / profit before  tax from continuing operations	(0.8)	29.1	26.5
8	Taxation	(3.2)	(6.8)	(12.2)
	(Loss) / profit for the period from continuing operations	(4.0)	22.3	14.3
	Discontinued operations
6	(Loss) / profit for the period from discontinued operations	(1.0)	-	-
	(Loss) / profit for the period	(5.0)	22.3	14.3
7	Earnings per share
	Basic from continuing operations	(2.3)p	12.6p	8.1p
	Diluted from continuing operations	(2.3)p	12.5p	8.0p
	Basic on profit for the period	(2.8)p	12.6p	8.1p
	Diluted on profit for the period	(2.8)p	12.5p	8.0p
8	Underlying profit before tax*
	Continuing	7.6	34.5	60.6
	Underlying earnings per share*
	Basic from continuing operations	3.2p	15.9p	27.4p
	Diluted from continuing operations	3.2p	15.7p	27.3p

*	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
		2009	2008	2008
Note		£m	£m	£m
	(Loss) / profit for the period	(5.0)	22.3	14.3
13	Actuarial losses on retirement benefit obligations	(3.4)	(6.6)	(9.7)
	Deferred tax on actuarial losses / gains	-	1.7	1.7
	Deferred tax on share based payments	-	-	(0.7)
	Exchange differences on retranslation of overseas net investments	(94.2)	7.1	196.6
	Exchange differences on net investment hedges	16.1	(2.4)	(47.4)
	Other comprehensive (loss) / income for the period	(81.5)	(0.2)	140.5
	Total comprehensive (loss) / income for the period	(86.5)	22.1	154.8

Group statement of changes in equity

(unaudited)

	Ordinary
	share	Share	Retained	Translation	Treasury
	capital	premium	earnings	reserve	shares	Total
	£m	£m	£m	£m	£m	£m
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 6 months to 30 June 2008
At 1 January 2008	49.8	268.9	128.4	3.3	(1.9)	448.5
Profit for the period	-	-	22.3	-	-	22.3
Other comprehensive income / (loss)	-	-	(4.8)	4.6	-	(0.2)
Total comprehensive income / (loss)	-	-	17.5	4.6	-	22.1
Exercise of share options	0.1	0.8	-	-	-	0.9
Share based payments	-	-	1.1	-	-	1.1
Treasury shares	-	-	-	-	0.4	0.4
Vesting of LTIPs	-	-	(1.3)	-	1.3	-
Dividends paid	-	-	(14.0)	-	-	(14.0)
At 30 June 2008	49.9	269.7	131.7	7.9	(0.2)	459.0
for the 12 months to 31 December 2008
At 1 January 2008	49.8	268.9	128.4	3.3	(1.9)	448.5
Profit for the period	-	-	14.3	-	-	14.3
Other comprehensive income / (loss)	-	-	(8.7)	149.2	-	140.5
Total comprehensive income / (loss)	-	-	5.6	149.2	-	154.8
Exercise of share options	0.1	0.8	-	-	-	0.9
Share based payments	-	-	1.8	-	-	1.8
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

Group statement of financial position

(unaudited)

		As at	As at	As at
		30 June	30 June	31 Dec
		2009	2008	2008
Note		£m	£m	£m
	Assets
	Non-current assets
	Property, plant and equipment	110.0	90.2	123.7
	Intangible assets	532.9	463.1	610.0
	Deferred tax assets	2.1	2.7	2.7
13	Retirement benefit assets	0.6	6.2	4.0
	Other non-current assets	0.9	0.4	1.0
		646.5	562.6	741.4
	Current assets
	Derivative financial instruments	0.3	0.1	0.5
	Inventories	56.8	65.1	80.2
	Trade and other receivables	105.9	128.6	129.0
	Income tax receivable	1.7	2.4	2.9
12(a)	Cash	58.0	43.4	46.9
		222.7	239.6	259.5
	Liabilities
	Current liabilities
12	Borrowings	(2.0)	(12.5)	(7.6)
	Derivative financial instruments	(0.8)	-	(2.9)
	Trade and other payables	(108.1)	(119.1)	(115.1)
	Current tax liabilities	(3.4)	(6.4)	(6.8)
	Provisions	(6.0)	(6.5)	(7.0)
		(120.3)	(144.5)	(139.4)
	Net current assets	102.4	95.1	120.1
	Non-current liabilities
12	Borrowings	(179.8)	(125.3)	(178.8)
	Income tax payable	(25.0)	(20.9)	(28.9)
	Deferred tax liabilities	(49.1)	(44.4)	(57.8)
13	Retirement benefit obligations	(3.8)	(4.2)	(3.9)
	Other non-current liabilities	(1.5)	(0.2)	(2.8)
	Provisions	(4.2)	(3.7)	(4.0)
		(263.4)	(198.7)	(276.2)
	Net assets	485.5	459.0	585.3
	Capital and reserves
	Equity share capital	49.9	49.9	49.9
	Share premium	269.7	269.7	269.7
	Retained earnings	91.6	131.7	113.4
	Translation reserve	74.4	7.9	152.5
	Treasury shares	(0.1)	(0.2)	(0.2)
	Total shareholders' equity	485.5	459.0	585.3

Group cash flow statement

(unaudited)

		6 months	6 months	12 months
		to	to	to
		30 June	30 June	31 Dec
		2009	2008	2008
Note		£m	£m	£m
11	Cash flows from operating activities
	Cash generated from operations	31.9	43.0	73.7
	Tax paid	(6.8)	(10.2)	(17.2)
	Net cash flows from operating activities	25.1	32.8	56.5
	Cash flow from investing activities
	Interest received	0.1	0.3	0.5
11	Acquisition of businesses (net of cash acquired)	(1.7)	(16.9)	(17.7)
	Purchase of property, plant and equipment	(8.3)	(16.2)	(30.0)
	Purchase of intangible assets (internally developed)	(5.6)	(2.2)	(7.3)
11	(Outflow) / inflow from sale of businesses	(0.6)	11.9	11.5
	Proceeds from sales of property, plant and equipment	-	0.1	1.3
	Net cash flows from investing activities	(16.1)	(23.0)	(41.7)
	Cash flows from financing activities
	Interest and other finance costs paid	(4.7)	(5.3)	(10.2)
	Net proceeds from issue of ordinary share capital	-	0.9	0.9
	Movement in treasury shares	-	0.4	0.4
	Increase in borrowings	12.0	17.5	16.8
	Dividends paid to shareholders	-	(14.0)	(21.1)
	Net cash flows from financing activities	7.3	(0.5)	(13.2)
	Effects of movements in foreign exchange rates	(5.2)	1.7	12.9
12(a)	Increase in cash and cash equivalents for the period	11.1	11.0	14.5
	Cash and cash equivalents brought forward	46.9	32.4	32.4
	Cash and cash equivalents carried forward	58.0	43.4	46.9

Notes to the Interim Report

(unaudited)

1 Authorisation of interim financial statements 

The Group's interim financial statements for the period ended 30 June 2009 were authorised for issue by the Board of Directors on 29 July 2009. 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 2008 and the year ended 31 December 2008 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 2008 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 237(2) or (3) of the Companies Act 1985.

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 2009 Annual Report and Accounts which do not differ significantly from those used in the preparation of the 2008 Annual Report and Accounts, except for the adoption of new Standards as of 1 January 2009, noted below: 

IFRS 8 Operating Segments 

This standard requires disclosure of information about the Group's operating segments and replaces the requirement to determine primary business and secondary geographical reporting segments of the Group. The Group determined that the operating segments were the same as the business segments previously identified under IAS 14 Segment Reporting. 

IAS 1 Revised Presentation of Financial Statements 

The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements. 

Adoption of these Standards did not have any effect on the financial position or performance 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

		Handset Products					Performance Materials			Wireless Systems
		6 months			6 months	12 months	6 months	6 months	12 months	6 months	6 months	12 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
		2009			2008	2008	2009	2008	2008	2009	2008	2008
		£m			£m	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue from customers		142.4			170.1	348.7	86.3	96.8	190.9	37.4	48.1	95.7
Segment profit before:		6.3			19.3	37.4	4.8	13.7	23.1	0.3	4.9	8.0
Amortisation of acquired intangible assets		(2.1)			(1.7)	(3.6)	(1.8)	(1.4)	(3.0)	(3.0)	(2.4)	(4.8)
Exceptional items		(0.8)			-	(3.3)	(0.8)	-	(13.8)	(1.8)	-	(3.2)
Operating profit / (loss)		3.4			17.6	30.5	2.2	12.3	6.3	(4.5)	2.5	-
										Total
										6 months	6 months	12 months
										to	to	to
										30 June	30 June	31 Dec
										2009	2008	2008
										£m	£m	£m
Continuing operations
Revenue from customers										266.1	315.0	635.3
Segment profit before:										11.4	37.9	68.5
Amortisation of acquired intangible assets										(6.9)	(5.5)	(11.4)
Exceptional items										(3.4)	-	(20.3)
Operating profit										1.1	32.4	36.8
Finance revenue										0.2	0.3	0.5
Finance costs										(4.1)	(4.3)	(9.6)
Financial instruments - fair value adjustments										1.9	0.1	(2.4)
Other net finance revenue - pension										0.1	0.6	1.2
(Loss) / profit before tax										(0.8)	29.1	26.5
Taxation										(3.2)	(6.8)	(12.2)
(Loss) / profit for the period from continuing operations										(4.0)	22.3	14.3
Discontinued operations
Loss before tax on prior year disposals										(1.0)	-	-
Taxation										-	-	-
Loss for the period from discontinued operations										(1.0)	-	-
(Loss) / profit for the period										(5.0)	22.3	14.3
		Handset Products					Performance Materials			Wireless Systems
		6 months	6 months			12 months	6 months	6 months	12 months	6 months	6 months	12 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
		2009	2008			2008	2009	2008	2008	2009	2008	2008
		£m	£m			£m	£m	£m	£m	£m	£m	£m
Segment assets		293.7	277.1			334.0	353.6	339.9	419.9	193.6	177.0	230.2
										Total
										6 months	6 months	12 months
										to	to	to
										30 June	30 June	31 Dec
										2009	2008	2008
										£m	£m	£m
Segment assets
Handset Products										293.7	277.1	334.0
Performance Materials										353.6	339.9	419.9
Wireless Systems										193.6	177.0	230.2
										840.9	794.0	984.1
Unallocated assets										28.3	8.2	16.8
Total assets										869.2	802.2	1,000.9

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
	2009	2008	2008	2009	2008	2008
Czech Koruna	30.44	32.58	31.47	30.54	30.24	27.77
Euros	1.12	1.29	1.26	1.17	1.26	1.03
Japanese Yen	142.68	207.16	192.62	158.90	211.39	130.33
Renminbi ("RMB")	10.23	13.95	12.91	11.25	13.67	9.81
Swedish Krona	12.18	12.12	12.09	12.76	11.91	11.37
US Dollars	1.50	1.97	1.86	1.65	1.99	1.44

5 Exceptional items

	6 months to	6 months to	12 months to
	30 June	30 June	31 Dec
	2009	2008	2008
	£m	£m	£m
Continuing operations:
Handset Products
Fixed asset write downs	(0.1)	-	(0.3)
Inventory write downs	-	-	(0.1)
Other restructuring costs	(0.7)	-	(2.9)
	(0.8)	-	(3.3)
Performance Materials
Fixed asset write downs	-	-	(1.5)
Inventory write downs	(0.4)	-	(1.4)
Other restructuring costs	(0.4)	-	(10.9)
	(0.8)	-	(13.8)
Wireless Systems
Inventory write downs	-	-	(0.1)
Other restructuring costs	(1.8)	-	(3.1)
	(1.8)	-	(3.2)
	(3.4)	-	(20.3)

Note

(a)	The total cash outlay for exceptional costs in 2009 was £4.8m (June 2008, £3.4m).
(b)	The tax effect on exceptional items in 2008 is a £0.2m tax credit (June 2008, £nil).
(c)	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
	2009	2008	2008
	£m	£m	£m
Loss on disposal of businesses:
Loss before tax on prior year disposals	(1.0)	-	-
Taxation	-	-	-
Loss after tax on disposals	(1.0)	-	-
Loss from discontinued operations	(1.0)	-	-

The loss from discontinued operations relates to warranty claims on businesses sold in prior periods.

7  Earnings per share

The calculation of basic and diluted earnings per share is based on the (loss) / profit 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 profits 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
	2009	2008	2008
(Loss) / profit	£m	£m	£m
(Loss) / profit after tax from continuing operations	(4.0)	22.3	14.3
Result from discontinued operations	(1.0)	-	-
(Loss) / profit for the period	(5.0)	22.3	14.3
	Number	Number	Number
	of shares	of shares	of shares
	(m)	(m)	(m)
Weighted average shares
Basic weighted average shares	177.4	177.0	177.2
Options	0.1	1.5	1.0
Diluted weighted average shares*	177.5	178.5	178.2
	Pence	Pence	Pence
Earnings per share
Basic from continuing operations	(2.3)	12.6	8.1
Diluted from continuing operations	(2.3)	12.5	8.0
Basic from discontinued operations	(0.5)	-	-
Diluted from discontinued operations	(0.5)	-	-
Basic on profit for the period	(2.8)	12.6	8.1
Diluted on profit for the period	(2.8)	12.5	8.0

* 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
	2009	2008	2008
	£m	£m	£m
Profit
Continuing operating profit before amortisation of acquired intangible assets and exceptional items	11.4	37.9	68.5
Finance revenue	0.2	0.3	0.5
Finance costs	(4.1)	(4.3)	(9.6)
Other finance revenue - pension	0.1	0.6	1.2
Continuing underlying profit before tax	7.6	34.5	60.6
Discontinued operating profit before amortisation of acquired intangible assets and exceptional items	-	-	-
Total underlying profit before tax	7.6	34.5	60.6
Tax
The underlying tax charge is calculated as follows:
Underlying tax on continuing operations	1.9	6.3	12.0
Underlying tax on discontinued operations	-	-	-
Total underlying tax	1.9	6.3	12.0
Continuing underlying tax rate	24.9%	18.3%	19.8%
Total underlying tax rate	24.9%	18.3%	19.8%
Tax relief on exceptional items	(0.2)	-	(2.2)
Deferred tax on goodwill and acquired intangible assets	1.5	0.5	2.4
Total tax charge	3.2	6.8	12.2
Analysis of tax charge:
Tax on profit from continuing operations	3.2	6.8	12.2
Tax on discontinued operations	-	-	-
Total tax charge	3.2	6.8	12.2
Earnings per share	Pence	Pence	Pence
Continuing underlying earnings per share - basic	3.2	15.9	27.4
Continuing underlying earnings per share - diluted	3.2	15.7	27.3
Total underlying earnings per share - basic	3.2	15.9	27.4
Total underlying earnings per share - diluted	3.2	15.7	27.3

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 £3.2m (June 2008, £6.8m, December 2008, £12.2m). 

9 Dividends paid and proposed

On 29 July 2009 the Board declared an interim dividend of 4.0p per share (2008, 4.0p). The interim dividend will be paid on 8 January 2010 to shareholders registered on 4 December 2009. 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
	2009	2008	2008	2009	2008	2008
	£m	£m	£m	£m	£m	£m
Final 2007	-	14.0	14.0	-	-	-
Interim 2008	-	-	7.1	-	7.1	7.1
Final 2008	-	-	-	-	-	14.0
Interim 2009	-	-	-	7.1	-	-
	-	14.0	21.1	7.1	7.1	21.1

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
	2009	2008	2008	2009	2008	2008
	Pence	Pence	Pence	Pence	Pence	Pence
Final 2007	-	7.88	7.88	-	-	-
Interim 2008	-	-	4.00	-	4.00	4.00
Final 2008	-	-	-	-	-	7.88
Interim 2009	-	-	-	4.00	-	-
	-	7.88	11.88	4.00	4.00	11.88

* attributable to the period

10 Business combinations

Acquisition of businesses in 2009

There have been no acquisitions in 2009.

Acquisition of businesses in 2008

In February 2008, Ezurio Limited, a UK based supplier of machine to machine solutions for wireless data applications was acquired for a total consideration of £13.7m. This purchase has been accounted for as an acquisition and all intangible assets were recognised at their respective fair values. The residual excess over the net assets acquired is recognised as goodwill in the financial statements.

Book and fair values of the net assets of the business acquired were as follows:

		Provisional
		fair
	Book	values to
	values	the Group
	£m	£m
Property, plant and equipment	0.1	0.1
Intangible assets	0.1	0.8
Inventories	0.7	0.7
Trade and other receivables	1.0	1.0
Income tax receivable	0.5	0.5
Trade and other payables	(1.0)	(1.0)
Deferred tax liabilities	-	(0.2)
Net assets acquired	1.4	1.9
Goodwill arising on acquisition		11.8
Consideration		13.7
Consideration satisfied by:
Cash consideration (including transaction costs)		(13.5)
Deferred cash consideration		(0.5)
Net cash acquired		0.3
		(13.7)

In 2008 the Group acquired a 100% interest in the acquisition noted above. Underlying losses before tax for the entity acquired were £1.0m following acquisition. If the acquisition had been held for the full 12 months of 2008, revenues would have been £0.6m higher, at £635.9m and profits would have been £0.2m lower, at £26.3m.

11 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
	2009	2008	2008
	£m	£m	£m
(Loss) / profit after taxation	(4.0)	22.3	14.3
Depreciation and other non-cash items
Depreciation	8.2	5.5	12.4
Amortisation of capitalised development costs	2.3	1.2	3.1
Exceptional fixed asset write downs	0.1	-	1.8
Exceptional inventory write downs	0.4	-	1.6
Loss on disposal of fixed assets	-	-	(0.2)
Share based payments	0.7	1.1	1.8
Amortisation of acquired intangible assets	6.9	5.5	11.4
Financial instruments - fair value adjustments	(1.9)	(0.1)	2.4
Pension charges	0.2	0.4	0.6
Other net finance costs	3.8	3.4	7.9
Taxation	3.2	6.8	12.2
Pension contributions	(0.2)	(0.2)	(1.0)
Changes in working capital
Inventories	14.1	(6.9)	(5.2)
Trade and other receivables	7.6	25.0	56.3
Trade, other payables and provisions	(9.5)	(21.0)	(45.7)
	12.2	(2.9)	5.4
Cash generated from continuing operations	31.9	43.0	73.7
Discontinued operations
Loss after taxation	(1.0)	-	-
Loss on disposal of businesses before taxation	1.0	-	-
Cash flow from discontinued operations	-	-	-
Cash generated from operations	31.9	43.0	73.7

Changes in working capital from continuing operations are after creditor decreases of £1.9m (June 2008, £3.4m) in respect of exceptional costs of redundancy and restructuring. 

Net cash outflow on acquisitions and disposals

	6 months	6 months	12 months
	to	to	to
	30 June	30 June	31 Dec
	2009	2008	2008
	£m	£m	£m
Acquisition of businesses
Consideration:
Cash consideration	-	(13.2)	(13.5)
Net cash acquired	-	0.3	0.3
	-	(12.9)	(13.2)
Deferred consideration paid	(1.7)	(4.0)	(4.5)
Net cash outflow on acquisition of businesses	(1.7)	(16.9)	(17.7)
Disposal of businesses
Consideration:
Net cash consideration
Prior year disposals	(0.6)	11.9	11.5
Net cash (outflow) / inflow on disposal of businesses	(0.6)	11.9	11.5

12 Borrowings

(a) Reconciliation of net borrowings

	At	At	At
	30 June	30 June	31 Dec
	2009	2008	2008
	£m	£m	£m
Increase in cash and cash equivalents (net of bank overdrafts)	11.1	11.0	14.5
Movement in borrowings	(12.0)	(17.5)	(16.8)
Differences on exchange on borrowings	16.6	(2.5)	(51.8)
Movement in net borrowings during the period	15.7	(9.0)	(54.1)
Net borrowings brought forward	(139.5)	(85.4)	(85.4)
Net borrowings carried forward	(123.8)	(94.4)	(139.5)
Cash and cash equivalents (net of bank overdrafts)	58.0	43.4	46.9
Current borrowings	(2.0)	(12.5)	(7.6)
Non-current borrowings	(179.8)	(125.3)	(178.8)
Net borrowings carried forward	(123.8)	(94.4)	(139.5)

(b) Committed borrowing facilities

The Group had total committed loan facilities of £358.0m at 30 June 2009 (June 2008, £351.0m), of which £356.0m (June 2008, £340.2m) was available for more than three years and £182.3m was drawn at 30 June 2009 (June 2008, £137.2m). Committed facilities include £2.0m (June 2008, £4.5m) of promissory notes issued to third parties in part satisfaction of acquisition consideration.

13 Retirement benefit obligations

A review of the main assumptions affecting the Group's defined benefit obligations was carried out at 30 June 2009, by the Group's actuaries.

The expected long term rates of return on gilts and bonds are estimated at 4.3% per annum (December 2008, 4.3%) and those for equities at 8.3% per annum (December 2008, 8.3%). 

The mortality assumption used at 30 June is the same as that used at 31 December 2008. 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.

For IAS 19 the schemes' liabilities have been calculated under the projected unit method and the main financial assumptions were inflation of 3.7% per annum (December 2008, 3.1%), salary increases of 4.7% per annum (December 2008, 4.1%) and a discount rate for liabilities of 6.2% per annum (December 2008, 6.1%). 

The change in the overall net surplus / (deficit) 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
	2009	2008	2008
	£m	£m	£m
Defined benefit net surplus / (deficit) at period start	0.1	8.1	8.1
Net pension income / (expense)	(0.1)	0.2	0.6
Employer contributions	0.2	0.3	1.0
Actuarial (loss) / gain	(5.4)	(7.2)	(10.3)
Asset ceiling adjustment	-	0.6	0.7
Insurance proceeds	2.0	-	-
Defined benefit net surplus / (deficit) at period end	(3.2)	2.0	0.1

The charge of £5.4m recognised in the statement of comprehensive income for the period is comprised of the £7.0m loss recognised on actuarial assumptions, less £1.6m in respect of tax previously provided on surpluses. An actuarial gain of £2.0m was also recorded in the statement of comprehensive income relating to a reimbursement right under an insurance policy. The reimbursement asset relates to cash received during the period.

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ENDIR DGGZNRLNGLZM

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