30th Jul 2007 07:00
Ultra Electronics Holdings PLC30 July 2007 30 July 2007 Ultra Electronics Holdings plc ("Ultra" or "the Group") Interim Results for the Six Months to 30 June 2007 FINANCIAL HIGHLIGHTS Six months to Six months to Change 30 June 2007 30 June 2006Revenue £192.9m £180.7m +7%Operating profit(1) £27.0m £25.3m +7%Profit before tax(2) £26.2m £23.8m +10%Earnings per share(2) 28.2p 25.5p +11%Dividend per share 6.7p 5.9p +14% (1) Before amortisation of intangibles arising on acquisition. IFRS profit fromoperations £25.5m (2006: £23.6m).(2) Before amortisation of intangibles arising on acquisition and profit on fairvalue movements on derivatives. IFRS profit before tax £25.8m (2006: £26.6m).Basic EPS 27.8p (2006: 28.5p). • Good Group performance underpinned by broad mix of activities - continuing buoyant conditions in civil aerospace drove growth in Aircraft & Vehicle Systems. - solid demand for command and control systems benefited Information & Power Systems - high priority demand for battlespace IT systems boosted Tactical & Sonar Systems• Operating profit(1) margins maintained despite currency impact and high development costs• Acquisition of Criticom for $33m completed after period-end• Strong balance sheet giving headroom for further acquisitions• Order book of £575m continues to provide good earnings visibility Douglas Caster, Chief Executive, commented:"Ultra has again demonstrated solid growth in sales and profits. At constantcurrencies, the growth in revenue was over 10% and the increase in profit beforetax* was 13%. Ultra has a broad spread of activities in the defence and civilsectors, a strong order book and a proven ability to execute programmessuccessfully. These give an excellent basis for further progress in themedium-term despite the continuing currency headwind. The acquisition ofCriticom, completed since the period-end, strengthens Ultra by complementing thehigh technology battlespace IT products and services that the Group provides toits customers." FINANCIAL RESULTS Six months ended Six months ended Growth 30 June 2007 30 June 2006 £m £mOrder book - Aircraft & Vehicle Systems 173.6 150.6 +15.3% - Information & Power Systems 108.2 115.6 -6.4% - Tactical & Sonar Systems 293.0 287.4 +1.9%Total order book 574.8 553.6 +3.8% Revenue - Aircraft & Vehicle Systems 49.5 45.6 +8.6% - Information & Power Systems 61.6 60.1 +2.5% - Tactical & Sonar Systems 81.8 75.0 +9.1%Total revenue 192.9 180.7 +6.8% Organic growth +6.2% Operating profit* - Aircraft & Vehicle Systems 7.7 6.9 +11.6% - Information & Power Systems 9.1 9.1 0% - Tactical & Sonar Systems 10.2 9.3 +9.7%Total operating profit* 27.0 25.3 +6.7% Interest (0.8) (1.5) -53.3% Headline profit before tax* 26.2 23.8 +10.1% Operating margin* - Aircraft & Vehicle Systems 15.6% 15.1% - Information & Power Systems 14.8% 15.1% - Tactical & Sonar Systems 12.5% 12.4%Total operating margin* 14.0% 14.0% Operating cash flow* 16.5 18.4Cash conversion* 61% 73%Net debt* at period-end 5.9 31.0Bank interest cover 34.4x 17.1xEarnings per share* 28.2p 25.5p +10.6% * footnoteoperating profit and operating margin are before amortisation of intangiblesarising on acquisition.headline profit before tax and earnings per share are before amortisation ofintangibles arising on acquisition and fair value movement on derivatives.operating cash flow is cash generated by operations, less net capitalexpenditure, R&D and LTIP share purchases.cash conversion is cash generated by operations, less net capital expenditure, R&D and LTIP share purchases as % of profit from operations before amortisationof intangibles arising on acquisition.net debt comprises bank overdrafts and loans less cash and cash equivalents. The Group's broad portfolio and spread of niche market positions underpinnedUltra's performance in the first six months of 2007. In robust market conditionsand despite strong currency headwinds, Ultra achieved a solid tradingperformance. Revenue and profit improved in the period compared with theprevious half-year and this growth was largely organic, with a smallcontribution from Winfrith Safety Systems, acquired in July 2006. Although Ultracontinued a high level of investment for future growth, operating margins weremaintained, reflecting the Group's continuing focus on achieving operationalefficiencies whilst delivering to customers the high quality of goods andservices that they demand. At the end of June, the order book had improved 4%over the same time last year to £575m, despite an adverse currency effect of£14m, and it continues to give Ultra good visibility of earnings. Revenue was 6.8% higher at £192.9m (2006: £180.7m) •of this revenue growth, 6.2% was organic •at constant exchange rates, revenue growth was 10.3% Operating profit* increased 6.7% to £27.0m (2006: £25.3m) •operating margin* maintained at 14.0% •at constant exchange rates, operating profit growth was 12.8% Operating cash conversion* was 61%. This reflected Ultra's very strong cashgeneration in the final quarter of 2006. The Group continues to invest cash inthe Boeing 787 and Airbus A400M aircraft programmes. Whilst these investments todrive future growth will continue, the Group's current expectation is for astronger cash performance for the full year. The impact on profit of IAS 39 and the amortisation of intangibles arising onacquisition was a reduction of £0.4m in the half compared to a gain of £2.9m inthe same period in 2006. The unpredictable volatility associated with the IAS 39gain or loss underscores Ultra's choice of 'headline profit before tax' as itspreferred measure of the Group's true trading performance. In the period Ultra incurred the costs of implementing a process of refinancingits UK and North American businesses. One impact of this is a small reduction inthe Group's effective tax rate. Foreign exchange rate movements continued to affect Ultra's financialperformance adversely, with currency translation having the most significantimpact during the period. About 40% of Ultra's revenues are generated by itsbusinesses in the USA and Canada and both these currencies weakened on averageby close to 10% compared to the rates that applied during the first half of2006. Consequently consolidated revenue would have been 4% higher if translatedat constant rates and operating profit* would have been more than 3% higher.With regard to transaction effects, Ultra's policy of hedging forward itsforeign currency exposure remains beneficial - a forward cover of 18-24 monthsis typical for US dollar denominated sales in the UK and Canada. However, thehedged rates also weakened during the period, with an overall adverse impact onoperating profit* of £0.7m. Hence operating profit* would have been £1.5m higherin total giving a growth rate of 13% at constant exchange rates. Net debt* at the end of the period was £5.9m compared to £7.2m at the end of2006. The Group's balance sheet remains strong, with net interest payable onborrowings covered approximately 34 times by operating profit*. An interim dividend of 6.7p (2006: 5.9p) will be paid on 28 September 2007 tothose shareholders on the register at the close of business on 24 August 2007.This represents a 13.6% increase in the interim dividend, higher than theincrease in earnings per share. OPERATIONAL REVIEW Aircraft & Vehicle Systems Revenue in Aircraft & Vehicle Systems increased by 8.6% to £49.5m compared to£45.6m for the same period last year and operating profit* increased 11.6% to£7.7m (2006: £6.9m). The division's order book at the end of the period was£173.6m (2006: £150.6m). Revenue growth continued to be driven by the buoyant civil aerospace market andby customer-funded development programmes. In addition to sales of equipment fornew aircraft, the division benefited from a continuing strong aftermarket. Therewas also demand for systems and equipment that help improve the mobility andsurvivability of armoured vehicles being used in current operations. In spite of adverse currency effects and the investments in new aircraftdevelopment programmes, operating profit* growth for the division reflected thebenefits of cost reduction programmes implemented in 2006 and increased levelsof activity. Highlights in the performance of this division included: • the successful completion of a challenging set of tests for Ultra's wing ice protection system for the new Boeing 787 aircraft. These tests were carried out in Boeing's specialist wind tunnel and witnessed by the certifying authorities. Their completion is a major early milestone in the qualification process for the system. • strong customer demand for Ultra's innovative human-machine interface devices for use on weapon stations that are being retrofitted onto existing US Army vehicles to provide an enhanced self-protection capability. Ultra's controllers emulate those used on game stations so their use is highly intuitive for young soldiers. • continuing deliveries of vision systems for the British Army's new Mastiff armoured vehicle that entered service in Afghanistan and Iraq at the start of the year in response to an urgent operational requirement. Ultra's equipment allows improved usage of the vehicles in day and night operations. Information & Power Systems Revenue in Information & Power Systems grew 2.5% to £61.6m compared to £60.1mfor the same period last year. Operating profit* was £9.1m (2006: £9.1m). Theorder book at the end of the period was £108.2m (2006: £115.6m) reflecting therelative growth of those businesses in the division that have shorter orderbooks. Revenue, which included a contribution from Winfrith Safety Systems, acquiredlast year, continued to benefit from strong growth in airport IT systems andincreased demand for a range of command & control systems. Growth was reduced bythe anticipated slowdown of sales of higher margin ADSI systems to a more normallevel. Operating profit* grew in line with the revenues of the division with higherprofit growth in most businesses being reduced by the lower level ofhigher-margin ADSI system sales. The Group's continuing focus on cost controlaugmented the operational performance of several businesses as did the increasedvolume of funded development activity across a broad range of programmes. Highlights of Information & Power Systems performance included: • increased development activity for Rolls-Royce on a replacement high integrity control system for naval nuclear reactors. • selection by VT Shipbuilding to supply an integrated combat and surveillance system for three offshore patrol vessels for the Trinidad & Tobago government. This is the first contract for a modular system that has been optimised for patrol vessels used to counter terrorism, smuggling and piracy and to police economic exclusion zones. • continued growth of airport IT systems, with high levels of activity at London's Heathrow Terminal 5 as it approaches handover to its operators later this year, together with sales of Ultra's new common use passenger check-in systems at a number of UK regional airports. Tactical & Sonar Systems Revenue in Tactical & Sonar Systems increased by 9.1% to £81.8m (2006: £75.1m)and operating profit* rose 9.7% to £10.2m (2006: £9.3m). The closing order bookof £293.0m (2006: £287.4m) reflected strong demand from the US Army for tacticalradio systems. The acquisition of Criticom for up to $33m was announced in the period andcompleted in July 2007. Criticom will operate as a business within the Tactical& Sonar Systems division. It designs, supplies and supports custom, secure andnon-secure video conferencing solutions. It has strong synergies with Ultra'sexisting tactical and data link businesses and strengthens the Group's positionsin these markets. Revenue growth was driven by further sales of airborne targeting pods for UKTornado aircraft and strong demand for battlespace IT products, notably networkinterfacing equipment for the US Marines. In both instances, the urgency of thecustomer demand was driven by the need to improve the capability of armed forcesin current operations. Operating profit* growth benefited from an increase in sales of battlespace ITequipment and a strong performance by the business supplying Boeing and otheraircraft makers with cockpit instrumentation. Highlights of this division's performance included: • initial sales of mine disposal systems for the Royal Navy's Hunt and Sandown classes of minehunters. These new systems increase the rate at which mines can be cleared and so help enhance the speed of advance of the main naval fleet in mined waters. • completion and qualification of a new version of Ultra's high capacity line-of-sight tactical radio used widely by the US Army and Marine Corps. The new version provides greater capacity to support the need to transmit ever increasing amounts of data. • the Group's selection to provide an integrated command and control system for Halifax Port, Canada. The system will provide appropriate levels of information and secure access to users such as port police, port operations staff, first responders, harbour pilots and other approved agencies. PROSPECTS Ultra has an exceptionally broad range of activities in international marketniches. The Group operates at all levels in the supply chain, selling togovernments and to most major defence and aerospace prime contractors. Ultra haspositions on a large number of platforms and programmes - no single programmerepresents more than 5% of the Group's sales in any one year. This multiplicityprovides resilience to the Group's performance. Ultra continues to develop its portfolio of businesses and niche activities toposition the Group to meet future customer requirements. Through the constantpursuit of product and process innovation, together with a flexible approach toworking with its customers, Ultra constantly expands its range of differentiatedproducts, services and solutions. In defence markets, budgets continue to be focused on the provision of smartsystems that will enhance the rapid identification of targets, precision attack,mobility, communications and the interoperability of forces. There is strongdemand for new systems as well as upgrades to existing platforms to provide thissmarter capability. Ultra's internal innovation combined with its proven trackrecord of teaming to access technologies enables the Group to deliverbest-of-breed system solutions. Ultra's strategies and positioning ensure thatthe Group will continue to benefit from a broad range of market opportunities. In the civil aerospace market trading conditions overall remain strong with highdemand for new, fuel-efficient aircraft. As the demand for air travel increasesglobally, so does the need for airport infrastructure investment, both at newand existing airports. Ultra is well positioned to benefit from this demand. The order book, valued at over £575m, continues to provide Ultra with a highlevel of earnings visibility and provides the Group with its customary level offirm order cover for the next twelve months. Ultra remains committed tomaintaining a high level of investment to drive future growth. This investmentis both internal in programmes which have solid prospects, and external inacquisitions which have a proven track record and which can be acquired atvalue-enhancing prices. In summary, Ultra's strong positioning, broad spread of activities, investmentsin growth markets and track record for delivery and service continue to give theBoard confidence in the Group's prospects for the second half of 2007. - Ends - Enquiries:Ultra Electronics Holdings plc 020 8813 4321Douglas Caster, Chief Executive www.ultra-electronics.comDavid Jeffcoat, Group Finance Director Weber Shandwick Financial 020 7067 0700Susan Ellis/Louise Robson Ultra Electronics Holdings plc Interim Results for the Six Months to 30 June 2007 Consolidated Income Statement Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 Note £'000 £'000 £'000 Continuing operations Revenue 2 192,868 180,715 377,040Cost of sales (143,853) (132,603) (274,466) ---------- --------- -----------Gross profit 49,015 48,112 102,574 Other operating income 1,694 761 1,505Distribution costs (345) (321) (810)Administrative expenses (24,676) (23,839) (48,569)Other operating expenses (202) (1,132) (753) ---------- --------- -----------Profit from operations 2 25,486 23,581 53,947 ---------- --------- ----------- Headline operating profit 3 26,991 25,253 57,509 Amortisation of intangibles arising on acquisition (1,505) (1,672) (3,562) Profit from operations 25,486 23,581 53,947 ---------- --------- ----------- Investment revenue 4 1,470 4,915 4,939Finance costs 5 (1,146) (1,849) (3,874) ---------- --------- -----------Profit before tax 25,810 26,647 55,012 ---------- --------- ----------- Headline profit before tax 3 26,243 23,778 54,915 Amortisation of intangibles arising on acquisition (1,505) (1,672) (3,562) Profit on fair value movements on derivatives 1,072 4,541 3,659 Profit before tax 25,810 26,647 55,012 ---------- --------- ----------- Tax on profit on ordinaryactivities 6 (6,969) (7,461) (15,404) ---------- --------- -----------Profit for the period from continuing operations attributable to equity holders of the parent 18,841 19,186 39,608 ========== ========= ===========Earnings per share (pence) From continuing operationsBasic 8 27.8 28.5 58.8 Diluted 8 27.6 28.3 58.3 ========== ========= =========== Ultra Electronics Holdings plc Interim Results for the Six Months to 30 June 2007 Consolidated Balance Sheet At 30 June At 30 June At 31 December 2007 2006 2006 Note £'000 £'000 £'000 Non-current assetsIntangible assets 149,458 150,726 149,758Property, plant and equipment 22,138 21,346 20,814Deferred tax assets 10,499 17,120 11,223 ---------- --------- ----------- 182,095 189,192 181,795 ---------- --------- ----------- Current assetsInventories 38,015 26,800 29,198Trade and other receivables 10 82,584 72,682 83,599Cash and cash equivalents 33,850 27,604 25,628 ---------- --------- ----------- 154,449 127,086 138,425 ---------- --------- ----------- Total assets 2 336,544 316,278 320,220 ========== ========= =========== Current liabilitiesTrade and other payables 11 (101,003) (88,768) (110,235)Tax liabilities (7,052) (9,854) (7,387)Obligations under financeleases (23) (29) (22)Short-term provisions (7,540) (5,482) (10,459) ---------- --------- ----------- (115,618) (104,133) (128,103) ---------- --------- ----------- Non-current liabilitiesRetirement benefit obligations (35,837) (46,113) (35,143)Other payables 11 (9,067) (1,765) (1,158)Deferred tax liabilities (2,680) (1,280) (2,830)Obligations under financeleases (39) (57) (48)Bank overdrafts and loans (39,735) (58,517) (32,722)Long-term provisions (6,013) (7,838) (2,825) ---------- --------- ----------- (93,371) (115,570) (74,726) ---------- --------- ----------- Total liabilities 2 (208,989) (219,703) (202,829) ---------- --------- ----------- Net assets 127,555 96,575 117,391 ========== ========= =========== EquityShare capital 9 3,386 3,373 3,378Share premium account 34,102 32,712 33,180Own shares (1,972) (2,692) (2,692)Hedging and translation reserves (6,657) (3,487) (4,837)Retained earnings 98,696 66,669 88,362 ---------- --------- -----------Total equity attributable toequity holders of the parent 127,555 96,575 117,391 ========== ========= =========== Ultra Electronics Holdings plc Interim Results for the Six Months to 30 June 2007 Consolidated Cash Flow Statement Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 Note £'000 £'000 £'000 Net cash inflow from operatingactivities 12 15,687 15,961 49,550 Investing activitiesInterest received 361 523 1,216Purchase of property, plant and equipment (3,924) (2,726) (4,759)Proceeds on disposal of property, plant and equipment 4 13 34Expenditure on product development and other intangibles (3,078) (1,684) (4,676)Acquisition of subsidiaryundertakings (net of cash acquired) - (4,443) (7,799) --------- --------- -----------Net cash used in investing activities (6,637) (8,317) (15,984) --------- --------- ----------- Financing activitiesIssue of share capital 930 1,045 1,518Purchase of Long-Term Incentive Plan shares - (513) (513)Dividends paid (8,463) (7,150) (11,102)Increase/(repayments) of borrowings 6,445 (13,167) (36,315)Repayments of obligations under finance leases (8) (17) (33) --------- --------- -----------Net cash used in financingactivities (1,096) (19,802) (46,445) --------- --------- ----------- Net increase/(decrease) in cash and cash equivalents 7,954 (12,158) (12,879) Cash and cash equivalents at beginning of period 25,628 40,193 40,193 Effect of foreign exchange rate changes 268 (431) (1,686) --------- --------- -----------Cash and cash equivalents at end of period 33,850 27,604 25,628 ========= ========= =========== Ultra Electronics Holdings plc Interim Results for the Six Months to 30 June 2007 Consolidated Statement of Recognised Income and Expense Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Exchange differences on translation of foreign operations (1,820) (2,497) (3,847)Actuarial gains on defined benefit pension schemes - - 7,827Tax on items taken directly to equity - - (1,923)Gain on cash flow hedge 173 763 226 ---------- --------- -----------Net (expense)/income recognised directly in equity (1,647) (1,734) 2,283Transfer to profit and loss on cashflow hedges (31) - (28)Profit for the period 18,841 19,186 39,608 ---------- --------- -----------Total recognised income and expense for the period attributable to equity holders of the parent 17,163 17,452 41,863 ========== ========= =========== Ultra Electronics Holdings plc Interim Results for the Six Months to 30 June 2007 Notes to the Interim Statement 1. General Information The financial information contained in this statement does not constitutestatutory accounts, as defined in section 240 of the Companies Act 1985, and hasnot been audited or reviewed. The unaudited accounts for the half years ended30th June 2007 and 30th June 2006 have been prepared using accounting policiesthat are consistent with those used in the statutory accounts for the year ended31 December 2006. A copy of the statutory accounts for that year has beendelivered to the Registrar of Companies. The auditors' report on those accountswas not qualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. 2. Segment information Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000External revenueAircraft & Vehicle Systems 49,493 45,583 93,907Information & Power Systems 61,600 60,067 120,517Tactical & Sonar Systems 81,775 75,065 162,616 ---------- --------- ----------- 192,868 180,715 377,040 ========== ========= =========== Profit from operationsAircraft & Vehicle Systems 7,682 6,867 13,190Information & Power Systems 9,107 9,074 19,333Tactical & Sonar Systems 10,202 9,312 24,986 ---------- --------- ----------- 26,991 25,253 57,509Amortisation of intangibles arising on acquisition (1,505) (1,672) (3,562) ---------- --------- -----------Profit from operations 25,486 23,581 53,947Investment revenue 1,470 4,915 4,939Finance costs (1,146) (1,849) (3,874) ---------- --------- -----------Profit before tax 25,810 26,647 55,012 ========== ========= =========== At 30 June At 30 June At 31 December 2007 2006 2006 £'000 £'000 £'000Total assets by divisionAircraft & Vehicle Systems 84,242 76,750 80,857Information & Power Systems 71,139 62,356 68,656Tactical & Sonar Systems 131,161 128,316 129,684 ---------- --------- ----------- 286,542 267,422 279,197Unallocated 50,002 48,856 41,023 ---------- --------- -----------Total assets 336,544 316,278 320,220 ========== ========= =========== Unallocated assets represent deferred tax assets, derivatives at fair value,cash and cash equivalents. At 30 June At 30 June At 31 December 2007 2006 2006 £'000 £'000 £'000 Total liabilities by divisionAircraft & Vehicle Systems (34,563) (27,645) (36,032)Information & Power Systems (37,535) (38,596) (40,296)Tactical & Sonar Systems (49,693) (37,557) (46,792) ---------- --------- ----------- (121,791) (103,798) (123,120)Unallocated (87,198) (115,905) (79,709) ---------- --------- -----------Total liabilities (208,989) (219,703) (202,829) ========== ========= =========== Unallocated liabilities represent derivatives at fair value, tax payables,retirement benefit obligations, bank loans and overdrafts. At 30 June At 30 June At 31 December 2007 2006 2006 £'000 £'000 £'000 Revenue by geographical destinationUnited Kingdom 82,537 70,782 150,645Mainland Europe 17,390 15,405 35,700North America 78,360 79,849 160,528Rest of World 14,581 14,679 30,167 ---------- --------- ----------- 192,868 180,715 377,040 ========== ========= =========== 3. Additional performance measures To present the underlying profitability of the Group on a consistent basis yearon year, additional performance indicators have been used. These are calculatedas follows: Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Profit from operations 25,486 23,581 53,947Amortisation of intangibles arising on acquisition 1,505 1,672 3,562 ---------- --------- -----------Headline operating profit (a) 26,991 25,253 57,509 ========== ========= =========== Profit before tax 25,810 26,647 55,012Profit on fair value movements on derivatives (1,072) (4,541) (3,659)Amortisation of intangibles arising on acquisition 1,505 1,672 3,562 ---------- --------- -----------Headline profit before tax(b) 26,243 23,778 54,915 ========== ========= =========== Cash generated by operations (see note 12) 23,507 23,328 66,414Purchase of property, plant and equipment (3,924) (2,726) (4,759)Proceeds on disposal of property, plant and equipment 4 13 34Expenditure on product development and other intangibles (3,078) (1,684) (4,676)Purchase of Long-Term Incentive Plan shares - (513) (513) ---------- --------- -----------Headline operating cash flow(c) 16,509 18,418 56,500 ========== ========= =========== Headline operating profit at (a) above has been shown before the amortisation ofintangible assets arising on acquisitions, which relates to acquiredintellectual property, customer relationships and profit in order book. Tomaintain a consistent presentation of financial performance over the longerterm, this charge has been excluded from headline operating profit. Headlineprofit before tax as shown at (b) in the above table and adjusted earnings pershare (see note 8) are also presented before the amortisation of intangibleassets arising on acquisition. IAS 39 requires the Group to fair value the derivative instruments used tomanage Ultra's foreign exchange exposures. This creates volatility in thevaluation of the outstanding instruments as exchange rates move over time. Thiswill have minimal impact on profit over the full term of the instruments, butcan cause significant volatility on particular balance sheet dates. Ultra istherefore stating headline profit before tax ((b) in the above table) andadjusted earnings per share (see note 8) before changes in the valuation ofthese instruments so that the underlying operating performance of the Group canbe seen more clearly. The Group is cash generative and reinvests funds to support the continuinggrowth of the business. It seeks to use an accurate and appropriate measure ofthe funds generated internally while sustaining this growth. For this, Ultrauses headline operating cash flow (c) rather than cash generated by operations,as its preferred indicator of cash generated and available to covernon-operating expenses such as tax and interest payments. The Group believesthat using cash generated by operations, with the exclusion of net expenditurein property, plant and equipment and outflows for capitalised productdevelopment and other intangibles, would result in an understatement of the truecash cost of sustaining a growing business. 4. Investment revenue Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Bank interest 361 374 1,216Fair value movement on derivatives 1,072 4,541 3,659Retirement benefit scheme finance income 37 - 64 ---------- --------- ----------- 1,470 4,915 4,939 ========== ========= ===========5. Finance costs Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Amortisation of finance costs of debt 42 31 65Interest payable on bank loans and overdrafts 1,134 1,816 3,835Interest payable on finance leases 1 2 2Transfers from equity on cash flow hedges (31) - (28) ---------- --------- -----------Total borrowing costs 1,146 1,849 3,874 ========== ========= =========== 6. Tax on profit on ordinary activities Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000Current taxUnited Kingdom 4,098 4,474 7,812Overseas 2,208 3,239 5,190 ---------- --------- ----------- 6,306 7,713 13,002 ---------- --------- -----------Deferred taxUnited Kingdom 21 (378) 1,118Overseas 642 126 1,284 ---------- --------- ----------- 663 (252) 2,402 ---------- --------- -----------Total 6,969 7,461 15,404 ========== ========= =========== 7. Ordinary dividends Six months Six months to 30 June to 30 June 2007 2006 £'000 £'000 Final dividend for the year ended 31 December 2006 of 12.6p (2005: 10.7p)per share 8,463 7,150 ========== =========Proposed interim dividend for the year ended 31 December 2007 of 6.7p(2006: 5.9p) per share 4,514 3,980 ========== ========= The proposed interim dividend was approved by the Board after 30 June 2007 andhas not been included as a liability as at 30 June 2007. 8. Earnings per share (pence) Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006From continuing operationsBasic adjusted (see below) 28.2 25.5 58.4 ---------- --------- -----------Diluted adjusted (see below) 28.0 25.2 57.9 ---------- --------- -----------Basic 27.8 28.5 58.8 ---------- --------- -----------Diluted 27.6 28.3 58.3 ---------- --------- ----------- The calculation of the basic, adjusted and diluted earnings per share is basedon the following data: Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000EarningsEarnings for the purposes of earnings per share being profit for the period from continuing operations 18,841 19,186 39,608 ========== ========= =========== Adjusted earningsProfit for the period from continuing operations 18,841 19,186 39,608Profit on fair value movements on derivatives (net of tax) (750) (3,270) (2,616)Amortisation of intangibles arising on acquisition (net of tax) 986 1,204 2,349 ---------- --------- -----------Earnings for the purposes of adjusted earnings per share 19,077 17,120 39,341 ========== ========= =========== The weighted average number of shares is given below: Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 Number of shares used for basic EPS 67,685,429 67,246,726 67,421,160Number of shares deemed to be issued at nil consideration following exercise of share options 481,058 567,845 529,555 ---------- ---------- -----------Number of shares used for fully diluted EPS 68,166,487 67,814,571 67,950,715 ========== ========== =========== 9. Share capital 171,613 shares, with a nominal value of £8,581, have been allotted in the firstsix months of 2007 under the terms of the Group's various share option schemes.The aggregate consideration received by the Company was £930,502. 10. Trade and other receivables At 30 June At 30 June At 31 December 2007 2006 2006 Trade receivables 43,586 45,874 52,783Provisions against receivables (797) (686) (640)Net trade receivables 42,789 45,188 52,143Amounts due from contract customers 28,642 20,367 23,072Derivatives at fair value 5,653 4,132 4,172Other receivables 5,500 2,995 4,212 ---------- --------- ----------- 82,584 72,682 83,599 ========== ========= =========== 11. Trade and other payables At 30 June At 30 June At 31 December 2007 2006 2006Amounts included in currentliabilities:Trade payables 44,346 29,848 37,868Amounts due to contract customers 24,596 28,826 29,176Derivatives at fair value 1,894 141 1,627Other payables 30,167 29,953 41,564 ---------- --------- ----------- 101,003 88,768 110,235 ========== ========= =========== At 30 June At 30 June At 31 December 2007 2006 2006Amounts included in non currentliabilities:Other payables 9,067 1,765 1,158 ---------- --------- ----------- 9,067 1,765 1,158 ========== ========= =========== 12. Cash flow information Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Profit from operations 25,486 23,581 53,947Adjustments for:Depreciation of property, plant and equipment 2,631 3,249 5,530Amortisation of intangible assets 2,338 1,942 6,258Cost of equity-settled employee share schemes 537 685 648Increase/(decrease) in post-employment benefit obligation 731 200 (259)Loss on disposal of property, plant and equipment 15 - 21Increase/(decrease) in provisions 161 (231) 2,553 ---------- --------- -----------Operating cash flows before movements in working capital 31,899 29,426 68,698 Increase in inventories (8,764) (1,620) (3,419)Decrease/(increase) in receivables 2,543 4,435 (6,929)(Decrease)/increase in payables (2,171) (8,913) 8,064 ---------- --------- -----------Cash generated by operations 23,507 23,328 66,414 Income taxes paid (6,710) (5,540) (13,032)Interest paid (1,110) (1,827) (3,832) ---------- --------- -----------Net cash inflow from operatingactivities 15,687 15,961 49,550 ========== ========= =========== Reconciliation of net movement in cash and cash equivalents to movement in netdebt Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Net increase/(decrease) in cash and cash equivalents 7,954 (12,158) (12,879)Cash (inflow)/outflow from(increase)/decrease in debt and finance leasing (6,437) 13,184 36,348 ---------- --------- -----------Change in net debt arising from cash flows 1,517 1,026 23,469Amortisation of finance costs of debt (36) (31) (65)Translation differences (264) 2,283 3,709 ---------- --------- -----------Movement in net debt in the period 1,217 3,278 27,113Net debt at start of period (7,164) (34,277) (34,277) ---------- --------- -----------Net debt at end of period (5,947) (30,999) (7,164) ========== ========= =========== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ULE.L