21st Jan 2008 07:00
Filtronic PLC21 January 2008 FILTRONIC PLC HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 NOVEMBER 2007 Filtronic plc ("Filtronic") announces its Half-Yearly Financial Report for thesix months ended 30 November 2007. Financial Summary • Revenue from continuing operations up 51% to £27.2m (2006: £18.0m)• Operating profit before exceptional items from continuing operations £2.3m (2006: loss £1.7m)• Loss from discontinued operations £3.2m (2006: profit £70.2m) including Compound Semiconductors impairment of £6.3m• Profit for the period of £0.9m (2006: £75.8m)• Cash of £117.4m (2006: £64.0m)• £0.8m net cash outflow from operating activities excluding the enhanced transfer value exercise payment Highlights • Point to Point increased revenue substantially by 91% and operating profit increased to £3.3m from £1.0m• Defence Electronics improved margins on slightly lower revenue• US Defence business sale completed in October 2007• Surplus properties sold generating £6.1m cash• Enhanced transfer value exercise for pension scheme completed and discussions commenced on restructuring the scheme• Agreement signed on 20 December 2007 with RF Micro Devices for the sale of the Compound Semiconductors business for £12.5m cash, due to complete on 29 February 2008• Board intention to return cash to shareholders by way of special dividend by the end of this financial year, subject to completion of court approval Filtronic Chairman, John Poulter, said: "Looking into the second half of this financial year, Defence has made progressin its order intake and is expected to demonstrate some improvement in trading.Point to Point, having seen exceptional growth in the first half, is expected totrade at a lower level although substantially ahead of the equivalent period inthe prior year. In the second half year, the conclusion of the pension scheme discussions,return of cash and maximising shareholder value in the continuing businessesremain priorities." Enquiries Filtronic plcJohn Poulter, Chairman Tel: 01274 415 306Charles Hindson, Chief Executive Mob: 07800 706 319 (mobile) Parkgreen Communications Ltd Tel: 020 7479 7933Paul McManus Mob: 07980 541 893 (mobile) [email protected] Interim Management Report Chairman's Statement Revenue from continuing operations was £27.2m for the six months ended 30November 2007 (£18.0m for the six months ended 30 November 2006), a growth of51%, with operating profit before exceptional items of £2.3m compared with anoperating loss of £1.7m for the prior period. Profit before tax from continuingoperations was £4.1m (£5.6m for the prior period). Discontinued operationsgenerated a loss of £3.2m (£70.2m profit for the prior period). Overall netprofit was £0.9m (£75.8m for the prior period). Cash at 30 November 2007 was£117.4m compared with £118.3m at year end. The period has been marked by a number of events which are set out below. Moredetail on the operating performance of the continuing businesses is contained inthe Chief Executive's report that follows. The sale of the US Defence business to TRU Holdings, Inc. was completed for amaximum consideration of $5.1m, of which $3.4m was received on completion. Disposal of surplus properties was completed with the sale of the formerheadquarters in Saltaire for proceeds of £5.8m. During the period and concluding in December, the enhanced transfer value offerto deferred members of the defined benefit pension scheme has been completed.This has resulted in a reduction in the liabilities of the scheme by 38% andrequired £6.2m funding by the company. It is intended to change the funding of past service liabilities to an externalannuity basis at a currently estimated additional funding of £30m. The companyhas also opened discussions with trustees with a view to restructuring thescheme, including the possibility of its closure. In anticipation of resolving these pension scheme matters, the Board isinitiating the necessary steps to obtain approvals from shareholders and thecourt to enable cancellation of the share premium account and creation ofdistributable reserves so that cash may be returned to shareholders. TheBoard's intention is to return cash, by way of a special dividend, by the end ofthis financial year, subject to court timescales. The current lack of distributable reserves precludes the Board from declaring aninterim dividend. Shortly after the end of the period, a definitive agreement was signed with RFMicro Devices, Inc. for the sale of the whole share capital of FiltronicCompound Semiconductors Limited for £12.5m cash. This transaction is expectedto complete on 29 February 2008. The agreement provides for ongoing supply toFiltronic's Point to Point business for at least three years and for itremaining at its current site at Newton Aycliffe. In the period to 30 November2007, the Compound Semiconductor business generated an operating profit beforeexceptional items of £1.6m and was cash positive. Following an impairmentreview at 30 November 2007, a non-cash impairment charge of £6.3m has beenincurred. Outlook Looking into the second half of this financial year, Defence has made progressin its order intake and is expected to demonstrate some improvement in trading.Point to Point, having seen exceptional growth in the first half, is expected totrade at a lower level although substantially ahead of the equivalent period inthe prior year. In the second half year, the conclusion of the pension scheme discussions,return of cash and maximising shareholder value in the continuing businessesremain priorities. John PoulterChairman21 January 2008 Interim Management Report Chief Executive's Review Half-yearly financial results Revenue arising from continuing operations for the six months ended 30 November2007 was £27.2m (2006: £18.0m), a growth of 51% compared with the prior period.Operating profit before exceptional items was £2.3m compared with an operatingloss of £1.7m for the prior period in 2006. Exceptional items of £1.9mrepresented costs relating to the enhanced transfer value pension exercise.Discontinued operations generated a loss of £3.2m, made up of £2.9m profit onWireless Infrastructure, £1.2m loss on US Defence and £4.9m loss on CompoundSemiconductors including an impairment charge of £6.3m. Continuing operations The segmental analysis of the operating results before exceptional items forcontinuing operations is as follows: Revenue Operating profit/ (loss) before exceptional itemsSix months ended 30 November 2007 2006 2007 2006 £m £m £m £m Point to Point 20.1 10.5 3.3 1.0Defence Electronics 7.1 7.5 0.6 0.1Central Services - - (1.3) (2.6)Unallocated pension charge - - (0.3) (0.2) ----- ----- ----- ----- 27.2 18.0 2.3 (1.7) ----- ----- ----- ----- Continuing operations revenue for the six months ended 30 November 2007 grew by51% to £27.2m (2006: £18.0m). Operating result for the period showed a significant improvement with bothcontinuing businesses in profit. Excluding exceptional items, the underlyingoperating profit of £2.3m compared with the prior period operating loss of£1.7m. Point to Point The Point to Point business's focus is transceiver modules and filters forbackhaul microwave radios linking mobile base stations. Revenue increased verysubstantially from £10.5m in the prior period to £20.1m in the current period(up by 91%), producing an operating profit of £3.3m in the current periodcompared with an operating profit of £1.0m in the prior period. This step up inthe level of activity, which reflects high short term demand from the principalcustomer together with increased supply to Point to Point's other customers. Defence Electronics The sale of the US Defence business to TRU Holdings Inc was completed in October2007 and is treated as a discontinued operation in these results. The remaining UK Defence Electronics business is involved in the supply ofcomplex components and subsystems for electronic warfare applications includingsignal generation, detection and jamming. Overall, revenue in Defence Electronics has declined from £7.5m in the priorperiod to £7.1m for the current period, reflecting a slower than expected orderintake. However, margins have improved resulting in an operating profit of£0.6m compared with £0.1m in the prior period. Discontinued operations Wireless Infrastructure An additional profit of £2.9m was generated principally from the resolution of anumber of working capital matters associated with the Wireless Infrastructuredisposal to Powerwave Technologies, Inc. US Defence The US Defence business made an operating loss of £1.0m in the period. The sale of the US Defence business was completed in October 2007 generating aloss of £0.2m excluding any potential contingent consideration. Compound Semiconductors Compound Semiconductors achieved 11% growth in revenue to £16.7m in the periodcompared with £15.1m in the prior period. This also represents a growth of 10%compared with the preceding six months ended 31 May 2007. This growth has beengenerated primarily by the extension of the increase in short term demand forswitch products by the main US customer. Underlying operating profit was £1.6m compared with an underlying loss of £1.4min the prior period. As announced on 20 December 2007, a definitive agreement has been signed for thesale of Filtronic Compound Semiconductors Limited ("FCSL") to RF Micro Devices,Inc. for £12.5m cash, with an expected completion date of 29 February 2008.Following completion, Filtronic will cease its activities in compoundsemiconductor manufacture and supply. FCSL will enter into a supply contractand lease, including provision of support services, to the Point to Pointbusiness. As Compound Semiconductors was held for sale at the balance sheetdate it is treated as a discontinued operation. Group matters Property disposals During November, the freehold property at the Waterfront, Saltaire was sold toGMI Waterside Shipley Limited for proceeds of £5.8m, resulting in a £0.1m losson disposal. In addition during the period, the surplus freehold property at Stewarton wassold for £0.3m equivalent to its book value. Pension matters The enhanced transfer value pension exercise was completed in December reducingthe scheme liabilities by 38% requiring £6.2m funding by the company. As at 30November 2007 the defined benefit pension liability, on the IAS19 basis, was£3.3m compared with £7.0m at 31 May 2007. Within the current estimate of £30m to change the funding of past serviceliabilities to an external annuity basis, around half of this is associated withthe businesses that have left or are leaving the group. Finance Net finance income was £3.7m (2006: £0.9m cost) reflecting the interest receivedon the cash deposits held through the period. Capital expenditure Capital expenditure in the six months to 30 November 2007 was £1.4m (2006:£9.4m). Cash flow and closing cash Net cash used in operating activities was £6.3m (2006: £13.3m) including £5.5mrelating to the pension scheme enhanced transfer value exercise. Sale of the USDefence business, other discontinued business adjustments including thesettlement of the Wireless Infrastructure product liability claim of £5.8m andsurplus properties generated £3.3m. Net capital expenditure on operatingassets, mainly in Point to Point, was £1.4m which, together with interestreceived of £3.3m and exchange movements of £0.2m, resulted in a closing cashbalance of £117.4m. Charles HindsonChief Executive21 January 2008 Responsibility Statement of the Directors Responsibility statement of the directors in respect of the half-yearlyfinancial report We confirm that to the best of our knowledge: • the condensed set of financial statements has been prepared inaccordance with IAS 34 Interim Financial Reporting as adopted by the EuropeanUnion; • the interim management report includes a fair review of theinformation required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indicationof important events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remaining sixmonths of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. By order of the Board21 January 2008 The Board The directors that served during the six months ended 30 November 2007 and theirrespective responsibilities are set out in the Annual Report 2007. Iain Gibson resigned as a director on 21 September 2007. Hemant Mardia was appointed a director on 18 October 2007. He continues in hisrole as Managing Director of the Point to Point business. Independent Review Report to Filtronic plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30November 2007, which comprises the condensed consolidated income statement, thecondensed consolidated statement of recognised income and expense, the condensedconsolidated balance sheet, condensed consolidated cash flow statement and therelated explanatory notes. We have read the other information contained in thehalf-yearly financial report, and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of financial statements. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the Disclosureand Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to thecompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company for our review work, forthis report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the DTR of the UK FSA. As disclosed in note 2, the annual financial statements of the group areprepared in accordance with International Financial Reporting Standards asadopted by the European Union. The condensed set of financial statementsincluded in this half-yearly financial report has been prepared in accordancewith IAS 34 Interim Financial Reporting as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity issued by the AuditingPractices Board for use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 November 2007 is not prepared, in allmaterial respects, in accordance with IAS 34 as adopted by the European Unionand the DTR of the UK FSA. KPMG Audit PlcChartered AccountantsLeeds21 January 2008 Condensed Consolidated Income Statement 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007Continuing operations note £000 £000 £000 Revenue 5, 6 27,179 18,033 38,434 ========== ========== ========== Operating profit/(loss) before exceptional items 2,322 (1,673) (1,853)Exceptional items 7 (1,874) 8,160 7,748 ---------- ---------- ----------Operating profit 5, 6 448 6,487 5,895 Loss on sale of property (93) - (415)Loss of sale of investments 13 - - (6,518)Finance income 14 4,875 1,610 5,221Finance costs 15 (1,131) (2,467) (3,839) ---------- ---------- ----------Profit before taxation 4,099 5,630 344Taxation - - 1,491 ---------- ---------- ----------Profit for the period from continuing operations 4,099 5,630 1,835(Loss)/profit for the period from discontinued 16 (3,225) 70,197 43,160operations ---------- ---------- ----------Profit for the period 874 75,827 44,995 ========== ========== ========== Basic and diluted earnings/(loss) per shareContinuing operations 29 5.52 p 7.53 p 2.46 pDiscontinued operations 29 (4.34) p 93.89 p 57.90 p ---------- ---------- ----------Basic and diluted earnings per share 29 1.18 p 101.42 p 60.36 p ========== ========== ========== The profit for the period is attributable to the equity shareholders of theparent company Filtronic plc. Condensed Consolidated Statement of Recognised Income and Expense 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Profit for the period 874 75,827 44,995 ---------- ---------- ----------Actuarial (loss)/gain on defined benefit pension scheme (38) (5,521) 562Loss on investments - (2,322) -Transfer to income from translation reserve related to (438) 61 61business disposalCurrency translation movement arising on consolidation (76) 115 47 ---------- ---------- ---------- (552) (7,667) 670 ---------- ---------- ---------- ---------- ---------- ----------Total recognised income and expense for the period 322 68,160 45,665 ========== ========== ========== The total recognised income and expense for the period is attributable to theequity shareholders of the parent company Filtronic plc. Condensed Consolidated Balance Sheet 30 November 30 November 31 May 2007 2006 2007 note £000 £000 £000Non-current assetsProperty, plant and equipment 30 3,821 50,031 26,089 ---------- ---------- ----------Current assetsInventories 6,494 12,685 10,625Trade and other receivables 12,974 20,675 16,268Investments - 57,587 -Cash and cash equivalents 117,442 63,983 118,267Asset classified as held for sale 31 16,570 - - ---------- ---------- ---------- 153,480 154,930 145,160 ---------- ---------- ---------- ---------- ---------- ----------Total assets 157,301 204,961 171,249 ---------- ---------- ----------Current liabilitiesTrade and other payables 11,448 26,184 23,944Income tax payable - 1,482 -Liabilities classified as held for sale 31 4,033 - - ---------- ---------- ---------- 15,481 27,666 23,944 ---------- ---------- ----------Non-current liabilitiesDefined benefit pension 3,287 13,281 6,954Deferred income - 3,308 2,140 ---------- ---------- ---------- 3,287 16,589 9,094 ---------- ---------- ---------- ---------- ---------- ----------Total liabilities 18,768 44,255 33,038 ---------- ---------- ---------- ---------- ---------- ----------Net assets 138,533 160,706 138,211 ========== ========== ==========EquityShare capital 7,432 7,432 7,432Share premium 139,253 139,253 139,253Capital redemption reserve 58 58 58Translation reserve 146 727 660(Accumulated losses)/retained earnings (8,356) 13,236 (9,192) ---------- ---------- ----------Total equity 138,533 160,706 138,211 ========== ========== ========== The total equity is attributable to the equity shareholders of the parentcompany Filtronic plc. Condensed Consolidated Cash Flow Statement 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2006 note £000 £000 £000Cash flows from operating activities Profit for the period 874 75,827 44,995Gain on sale of discontinued operations (2,667) (86,001) (80,139)Taxation - 631 (860)Finance costs 1,131 2,706 4,078Finance income (4,875) (1,610) (5,221)Loss on sale of investments - - 6,518Loss on sale of property 93 - 415 ---------- ---------- ----------Operating loss 34 (5,444) (8,447) (30,214)Defined benefit pension charge/(credit) 2,331 (7,032) (5,649)Defined benefit pension contributions paid (5,745) (5,944) (7,695)Share-based payments - 567 567Goodwill impairment - 2,716 2,653Property, plant and equipment impairment 6,300 - 17,511Depreciation 1,221 5,121 8,252Loss on sale of plant and equipment 86 144 7,316Licence fee released to income (1,167) (1,167) (2,335)Movement in inventories (524) (5,271) (3,201)Movement in trade and other receivables (1,572) (3,222) 381Movement in trade and other payables (1,756) 9,171 1,719 ---------- ---------- ----------Cash flow from operations (6,270) (13,364) (10,695)Taxation received - 79 88 ---------- ---------- ----------Net cash used in operating activities 34 (6,270) (13,285) (10,607) ---------- ---------- ---------- Condensed Consolidated Cash Flow Statement 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 note £000 £000 £000 Net cash used in operating activities 34 (6,270) (13,285) (10,607) ---------- ---------- ----------Cash flows from investing activitiesProceeds from sale of property 6,066 - 2,750Proceeds from sale of plant and equipment 27 78 334Interest received 3,303 449 2,850Acquisition of property, plant and equipment (1,363) (9,391) (16,605)Sale of discontinued operations (2,794) 105,107 105,252Proceeds from sale of investments - - 53,391 ---------- ---------- ----------Net cash from investing activities 34 5,239 96,243 147,972 ---------- ---------- ----------Cash flows from financing activitiesBank revolving credit repaid - (18,000) (18,000)Bank loan renewal fee paid - (508) (508)Interest paid - (573) (575)Shares issued - 87 87Shares bought back - (1,137) (1,137)Dividends paid - (1,348) (1,348) ---------- ---------- ----------Net cash used in financing activities 34 - (21,479) (21,481) ---------- ---------- ---------- Movement in cash and cash equivalents (1,031) 61,479 115,884Currency exchange loss on sale of discontinued - (2,784) (2,784)operationsCurrency exchange movement 206 (5) (126)Opening cash and cash equivalents 118,267 5,293 5,293 ---------- ---------- ----------Closing cash and cash equivalents 117,442 63,983 118,267 ========== ========== ========== Notes to the Condensed Financial Statements 1 Company information Filtronic plc is a company registered in England and Wales, domiciled in theUnited Kingdom, and is listed on the London Stock Exchange. The company'sregistered number is 2891064. The address of the company's registered office isFiltronic plc, Airedale House, Acorn Park, Charlestown, Shipley, West Yorkshire,BD17 7SW. Copies of the company's annual report and half-yearly financial report areavailable from the company's registered office or the company's website atwww.filtronic.com. 2 Basis of preparation The half-yearly financial report, including the condensed consolidated financialstatements for the six months ended 30 November 2007, has been prepared inaccordance with the Disclosure and Transparency Rules of the UK FinancialServices Authority and the requirements of IAS 34 Interim Financial Reporting asadopted by the European Union. The half-yearly financial report for the six months ended 30 November 2007 wasapproved by the Board on 21 January 2008. The condensed consolidated financial statements for the six months ended 30November 2007 consolidate the financial statements of the company and all of itssubsidiaries. The condensed consolidated financial statements for the six months ended 30November 2007 have not been audited. The half-yearly financial report for the six months ended 30 November 2007 doesnot constitute financial statements as defined in section 240 of the CompaniesAct 1985, and does not include all of the information and disclosures requiredfor annual financial statements. The half-yearly report should be read inconjunction with the annual report 2007, which includes annual financialstatements for the year ended 31 May 2007. The financial information for the year ended 31 May 2007 has been extracted fromthe annual financial statements included in the annual report 2007, which hasbeen filed with the Registrar of Companies. The report of the auditors on thosefinancial statements was (i) unqualified, (ii) did not include a reference toany matters to which the auditors drew attention by way of emphasis withoutqualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies act 1985. The condensed consolidated financial statements for the six months ended 30November 2007 have been prepared using the accounting policies set out in theannual financial statements for the year ended 31 May 2007 included in theannual report 2007. Those annual financial statements were prepared inaccordance with International Financial Reporting Standards as adopted by theEuropean Union. The annual financial statements for the year ending 31 May 2008 will be impactedby IFRS 7 Financial Instruments: Disclosure and IAS 1 Presentation of FinancialStatements - Capital Disclosures. They will increase the amount of disclosurein the annual financial statements. The accounting, income and net assets willremain unchanged. The risks and uncertainties faced by the company are the same as those disclosedin the annual report 2007, except for those specifically related to the CompoundSemiconductors business, which will be eliminated by its expected sale on 29February 2008. 3 Accounting estimates and judgements The preparation of the financial statements requires the use of accountingestimates and judgements, which affect the application of accounting policiesand reported amounts of assets and liabilities, income and expenses. The estimates and judgements are continually evaluated. They are based onhistorical experience and other factors, including expectations of the future,which are believed to be reasonable under the circumstances. Actual results maydiffer from the expected results. The accounting estimates and judgements that have a significant effect on thefinancial statements are the same as those applied and disclosed in the annualfinancial statements for the year ended 31 May 2007. At 30 November 2007 an impairment review of the Compound Semiconductorsproperty, plant and equipment assets was performed. This resulted in animpairment of the property assets, as disclosed in note 20. 4 Discontinued operations During the six months ended 30 November 2007 the Defence Electronics business inthe United States of America was sold, and the Compound Semiconductors businesswas classified as a disposal group held for sale. Consequently the results ofboth these businesses have been reclassified as discontinued operations for thecurrent and comparative periods. Notes to the Condensed Financial Statements 5 Business segment analysis continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000RevenuePoint to Point 20,067 10,536 22,364Defence Electronics 7,112 7,497 16,070 ---------- ---------- ---------- 27,179 18,033 38,434 ========== ========== ==========Operating profitPoint to Point 3,287 1,002 2,234Defence Electronics 563 61 1,125Central Services (1,537) (2,952) (5,208)Unallocated pension (charge)/credit (1,865) 8,376 7,744 ---------- ---------- ----------Operating profit 448 6,487 5,895Loss on sale of property (93) - (415)Loss on sale of investments - - (6,518)Finance income 4,875 1,610 5,221Finance costs (1,131) (2,467) (3,839) ---------- ---------- ----------Profit before taxation 4,099 5,630 344Taxation - - 1,491 ---------- ---------- ----------Profit for the period from continuing operations 4,099 5,630 1,835 ========== ========== ========== Notes to the Condensed Financial Statements 6 Geographical origin segment analysis continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000RevenueUnited Kingdom 26,671 18,033 37,815Australia 508 - 619 ---------- ---------- ---------- 27,179 18,033 38,434 ---------- ---------- ---------- Operating profitUnited Kingdom 328 6,487 5,721Australia 120 - 174 ---------- ---------- ----------Operating profit 448 6,487 5,895Loss on sale of property (93) - (415)Loss on sale of investments - - (6,518)Finance income 4,875 1,610 5,221Finance costs (1,131) (2,467) (3,839) ---------- ---------- ----------Profit before taxation 4,099 5,630 344Taxation - - 1,491 ---------- ---------- ----------Profit for the period from continuing operations 4,099 5,630 1,835 ========== ========== ========== Notes to the Condensed Financial Statements 7 Exceptional items continuing operations Operating profit is stated after charging/(crediting) exceptional items asfollows: 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 note £000 £000 £000 Redundancy costs 8 - 217 389Share-based payments 9 - 178 178Enhanced pension transfer value offer costs 10 270 - -Pension settlement charge 11 1,604 - -Pension past service credit 12 - (8,555) (8,315) ---------- ---------- ---------- 1,874 (8,160) (7,748) ========== ========== ========== 8 Redundancy costs continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Defence Electronics - - 158Central Services - 217 231 ---------- ---------- ---------- - 217 389 ========== ========== ========== 9 Share-based payments continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000Share option expense:Central Services - 178 178 ====== ====== ====== All outstanding share options vested on the completion of the sale of theWireless Infrastructure business on 16 October 2006. Consequently all theremaining share-based payment cost was charged in the six months ended 30November 2006. Notes to the Condensed Financial Statements 10 Enhanced pension transfer value offer costs continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Enhanced pension transfer value offer costs:Central Services 270 - - ====== ====== ====== Professional fees were incurred in connection with the enhanced pension transfervalue offer made during the period ended 30 November 2007. 11 Pension settlement charge continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Pension settlement charge 1,604 - - ====== ====== ====== The pension settlement charge resulted from the settlement of the enhancedtransfer values paid out during the period ended 30 November 2007. The companypaid £5,279,000 of additional contributions to the pension scheme to fund thesettlement of the enhanced transfer values. 12 Pension past service credit continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Pension past service credit - (8,555) (8,315) ====== ====== ====== In August 2006 the defined benefits pension scheme was changed from a finalsalary basis to a career average revalued earnings basis. This resulted in apast service credit due to a reduction in the past service pension liabilities. Notes to the Condensed Financial Statements 13 Loss on sale of investments continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Proceeds from sale of Powerwave shares - - 53,391Value of Powerwave shares consideration at completion ofthe sale ofWireless Infrastructure business - - (59,909) ---------- ---------- ---------- - - (6,518) ========== ========== ========== On 16 October 2006 the company received 17,700,000 shares in PowerwaveTechnologies, Inc. common stock, as part of the consideration for the sale ofthe Wireless Infrastructure business. All the shares were sold in the sixmonths ended 31 May 2007. Notes to the Condensed Financial Statements 14 Finance income continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Interest income 3,303 449 2,850Expected return on pension scheme assets 1,422 1,161 2,371Currency exchange gains 150 - - ---------- ---------- ---------- 4,875 1,610 5,221 ========== ========== ========== 15 Finance costs continuing operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Interest expense - 573 575Bank loan renewal fee - 508 508Interest on pension scheme liabilities 1,131 1,312 2,646Currency exchange losses - 74 110 ---------- ---------- ---------- 1,131 2,467 3,839 ========== ========== ========== Notes to the Condensed Financial Statements 16 (Loss)/Profit for the period from discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007Discontinued operations note £000 £000 £000 Revenue 17, 18 19,157 77,233 96,521 ========== ========== ==========Operating profit/(loss) before exceptional items 583 (4,829) (5,767)Exceptional items 19 (6,475) (10,105) (30,342) ---------- ---------- ----------Operating loss 17, 18 (5,892) (14,934) (36,109)Finance costs 25 - (239) (239) ---------- ---------- ----------Loss before taxation (5,892) (15,173) (36,348)Taxation - (631) (631) ---------- ---------- ----------Loss after taxation (5,892) (15,804) (36,979)Gain of sale of discontinued operations 26 2,667 86,001 80,139 ---------- ---------- ----------(Loss)/profit for the period from discontinued (3,225) 70,197 43,160operations ========== ========== ========== Notes to the Condensed Financial Statements 17 Business segment analysis discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000RevenueWireless Infrastructure - 58,039 58,039Defence Electronics 2,430 4,121 8,159Compound Semiconductors 16,727 15,073 30,323 ---------- ---------- ---------- 19,157 77,233 96,521 ========== ========== ==========Operating lossWireless Infrastructure - (2,554) (2,554)Defence Electronics (959) (3,855) (4,556)Compound Semiconductors (4,933) (8,525) (28,999) ---------- ---------- ----------Operating loss (5,892) (14,934) (36,109)Finance costs - (239) (239) ---------- ---------- ----------Loss before taxation (5,892) (15,173) (36,348)Taxation - (631) (631) ---------- ---------- ----------Loss after taxation (5,892) (15,804) (36,979) ========== ========== ========== The operating loss is stated after crediting the release of deferred income asfollows: Compound Semiconductors licence fee 1,167 1,167 2,335 ========== ========== ========== Notes to the Condensed Financial Statements 18 Geographical origin segment analysis discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000RevenueUnited Kingdom 16,727 39,243 54,493Finland - 8,654 8,654Hungary - 7,427 7,427United States of America 2,430 18,937 22,975China - 22,720 22,720Inter segment - (19,748) (19,748) ---------- ---------- ---------- 19,157 77,233 96,521 ========== ========== ==========Operating lossUnited Kingdom (4,933) (12,856) (33,330)Finland - (1,201) (1,201)Hungary - 2,206 2,206United States of America (959) (3,117) (3,818)China - 34 34 ---------- ---------- ----------Operating loss (5,892) (14,934) (36,109)Finance costs - (239) (239) ---------- ---------- ----------Loss before taxation (5,892) (15,173) (36,348)Taxation (631) (631) ---------- ---------- ----------Loss after taxation (5,892) (15,804) (36,979) ========== ========== ========== Notes to the Condensed Financial Statements 19 Exceptional items discontinued operations Operating loss is stated after charging exceptional items as follows: 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 note £000 £000 £000 Compound Semiconductors assets impairment 20 6,300 - 20,111Capital charges/Loss on disposal of plant and 21 - 7,000 7,057equipmentRedundancy costs 22 175 - 132Goodwill impairment 23 - 2,716 2,653Share-based payments 24 - 389 389 ---------- ---------- ---------- 6,475 10,105 30,342 ========== ========== ========== 20 Compound Semiconductors assets impairment discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Property, plant and equipment impairment 6,300 - 17,511Inventory impairment - - 2,600 ---------- ---------- ---------- 6,300 - 20,111 ========== ========== ========== Following an impairment review at 31 May 2007, the plant and equipment andinventory at the Compound Semiconductors facility was impaired. The impairmentresulted from the reduction in the scale of the business, due to the decision ofthe principal customer to in-source its switch production from September 2007. Following a further impairment review at 30 November 2007 the property at theCompound Semiconductors facility was impaired. Notes to the Condensed Financial Statements 21 Capital charges/Loss on disposal of plant and equipment discontinuedoperations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Capital charges/Loss on disposal of plant and equipmentdiscontinued operations - 7,000 7,057 ====== ====== ====== The capital charges/loss on disposal of plant and equipment at the CompoundSemiconductors facility was incurred as a result of the curtailment of theexpansion plan at the facility. 22 Redundancy costs discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Compound Semiconductors 175 - 132 ====== ====== ====== 23 Goodwill impairment discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Goodwill impairment - 2,716 2,653 ====== ====== ====== Following an impairment review at 30 November 2006 the goodwill related to SageLaboratories, Inc. was impaired. Sage Laboratories, Inc. was located in theUnited States of America and formed part of the Defence Electronics division. Notes to the Condensed Financial Statements 24 Share-based payments discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000Share options expense:Wireless Infrastructure - 234 234Compound Semiconductors - 155 155 ---------- ---------- ---------- - 389 389 ========== ========== ========== All outstanding share options vested on the completion of the sale of theWireless Infrastructure business on 16 October 2006. Consequently all theremaining share-based payment cost was charged in the six months ended 30November 2006. 25 Finance costs discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Currency exchange losses - 239 239 ====== ====== ====== Notes to the Condensed Financial Statements 26 Gain on sale of discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 note £000 £000 £000Gain/(loss) on sale of:Wireless Infrastructure business 27 2,867 86,001 80,139Defence Electronics business 28 (200) - - ---------- ---------- ---------- 2,667 86,001 80,139 ========== ========== ========== 27 Gain on sale of the Wireless Infrastructure business 6 months ended 30 November 2007 £000 Additional consideration 2,675Adjustment to sale costs 192 ---------- 2,867 ========== The Wireless Infrastructure business was sold on 16 October 2006. The sale wasanalysed in the financial statements for the year ended 31 May 2007. Additionalconsideration was received in the period ended 30 November 2007, which had notbeen recognised in the year ended 31 May 2007. An adjustment was made for salecosts overprovided in the year ended 31 May 2007. Notes to the Condensed Financial Statements 28 Loss on sale of the Defence Electronics business On 12 October 2007 the Defence Electronics business of Sage Laboratories, Inc.in the United States of America was sold. The initial consideration was$3,556,000 and a further $1,000,000 of deferred consideration is due in January2009. Also there may be a further $500,000 of contingent consideration due inJanuary 2009, depending on the revenue performance of the business, which hasnot yet been recognised. The sale is analysed as follows. 6 months ended 30 November 2007 £000Consideration and costsInitial consideration 1,712Deferred consideration 481Sale costs (210)Currency translation adjustment 438 ---------- 2,421 ==========Assets and liabilities soldProperty, plant and equipment 1,130Inventories 1,240Trade and other receivables 803Trade and other payables (552) ----------Net assets sold 2,621Loss on sale of the Defence Electronics business (200) ---------- 2,421 ========== Notes to the Condensed Financial Statements 29 Basic and diluted earnings/(loss) per share 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000Profit/(loss) for the periodContinuing operations 4,099 5,630 1,835Discontinued operations (3,225) 70,197 43,160 ---------- ---------- ----------Profit for the period 874 75,827 44,995 ========== ========== ========== 000 000 000 Basic and diluted weighted average number of shares 74,323 74,762 74,543 ========== ========== ==========Basic and diluted earnings/(loss) per shareContinuing operations 5.52 p 7.53 p 2.46 pDiscontinued operations (4.34) p 93.89 p 57.90 p ---------- ---------- ----------Basic and diluted earnings per share 1.18 p 101.42 p 60.36 p ========== ========== ========== Notes to the Condensed Financial Statements 30 Property, plant and equipment 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000Carrying amountOpening balance 26,089 69,248 69,248Additions 1,363 9,391 16,605Transfers to held for sale (8,646) - -Disposals (6,272) (222) (10,815)Disposals through sale of business (1,130) (23,082) (23,082)Depreciation (1,221) (5,121) (8,252)Impairment (6,300) - (17,511)Currency translation movement (62) (183) (104) ---------- ---------- ----------Closing balance 3,821 50,031 26,089 ========== ========== ========== Notes to the Condensed Financial Statements 31 Assets and liabilities classified as held for sale On 30 November 2007 the decision was taken to sell the Compound Semiconductorsbusiness. Consequently the Compound Semiconductors business has been classifiedas a disposal group held for sale and a discontinued operation. On 20 December 2007 the company entered into an agreement to sell the CompoundSemiconductors business for £12,500,000. The sale is expected to complete on 29February 2008. The assets and liabilities classified as held for sale are as follows. 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Property, plant and equipment 8,646 - -Inventories 3,358 - -Trade and other receivables 4,566 - - ---------- ---------- ----------Assets classified as held for sale 16,570 - - ========== ========== ========== Trade and other payables 3,060 - -Deferred income 973 - - ---------- ---------- ----------Liabilities classified as held for sale 4,033 - - ========== ========== ========== ---------- ---------- ----------Net assets of the Compound Semiconductors business 12,537 - - ========== ========== ========== Notes to the Condensed Financial Statements 32 Dividends The dividends recognised in equity and paid during the period were as follows: 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 Per £000 £000 £000 share Final dividend year ended 31 May 2006 1.80p - 1,348 1,348 ====== ====== ====== 33 Reconciliation of movements in total equity 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Opening total equity 138,211 94,377 94,377Total recognised income and expense for the period 322 68,160 45,665Share-based payments - 567 567Dividends - (1,348) (1,348)Shares issued - 87 87Shares bought back - (1,137) (1,137) ---------- ---------- ----------Closing total equity 138,533 160,706 138,211 ========== ========== ========== Notes to the Condensed Financial Statements 34 Note to the condensed consolidated cash flow statement 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 note £000 £000 £000Operating lossContinuing operations 448 6,487 5,895Discontinued operations (5,892) (14,934) (36,109) ---------- ---------- ---------- (5,444) (8,447) (30,214) ========== ========== ==========Net cash used in operating activitiesContinuing operations (6,381) (4,752) (7,144)Discontinued operations 111 (8,533) (3,463) ---------- ---------- ---------- (6,270) (13,285) (10,607) ========== ========== ==========Net cash from investing activitiesContinuing operations 8,238 (164) 58,097Discontinued operations (205) (8,700) (15,377)Sale of discontinued operations 35 (2,794) 105,107 105,252 ---------- ---------- ---------- 5,239 96,243 147,972 ========== ========== ==========Net cash used in financing activitiesContinuing operations - (21,479) (21,481) ========== ========== ========== 35 Net cash from sale of discontinued operations 6 months 6 months Year ended ended ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Consideration received 4,324 109,810 110,622Sale costs paid (1,368) (4,703) (5,370)Product liability costs paid (5,750) - - ---------- ---------- ---------- (2,794) 105,107 105,252 ========== ========== ========== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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