2nd Aug 2007 07:01
Laird Group PLC02 August 2007 2 August 2007 THE LAIRD GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2007 6 months to 30 June 2007 2006 £m £m Revenue - Continuing operations 246.7 165.2 + 49% - Discontinued operations 72.9+ 120.9 319.6 286.1 ------- ------- Underlying operating profit from 34.1 24.7 + 38% continuing operations (i) Total underlying profit before tax (i) 34.0 32.7 + 4% Profit before tax from continuing 21.2 15.1 + 40% operations Profit for the period 118.0 21.6 Net borrowings 80.9 108.7 Shareholders' funds 415.3 398.5 p/share* p/share* Underlying earnings from continuing 13.0 9.2 + 41% operations (i) Total underlying earnings (i) 14.7 14.8 - 1% Basic earnings from continuing 8.9 6.2 + 44% operations Dividend 3.62 3.35 + 8% Explanatory notes: i) Laird uses underlying results as key performance indicators. Underlyingprofit before tax and underlying earnings per share are stated beforeexceptional items, the amortisation of acquired intangible assets, deferred taxon acquired intangible assets and goodwill, the gain or loss on disposal ofbusinesses and the impact arising from the fair valuing of financialinstruments. The narrative that follows is based on underlying operating profit,profit before tax and earnings per share, as the Directors believe that theseprovide a more consistent measure of operating performance. + 2007: four months only * The weighted average number of shares used to calculate earnings and dividends per share was 195.3 million in the first half of 2007 and 181.0 million in the first half of 2006. Highlights • Laird transformed into a focused electronics and technology company with high growth potential. Successful divestment of Laird Security Systems for £242.5 million, with a gain on sale of £109.4 million. • An outstanding result from Laird Technologies in the half year: - Revenue from continuing operations increased by 49% to £246.7 million, with organic revenue growth of 30%. - Underlying operating profit from continuing operations increased by 38%, to £34.1 million, and up 51% at constant exchange rates. - Profit before tax from continuing operations increased by 40%, to £21.2 million. - Underlying earnings per share from continuing operations increased by 41%, to 13.0 pence and up 53% at constant exchange rates. • Total underlying profit before tax of £34.0 million, with 4% growth over 2006 despite the divestment of Laird Security Systems and the adverse effect of currency movements. Growth of 14% at constant exchange rates. • Approximately £100 million returned to shareholders through the payment of a special dividend of 50 pence per share. • Healthy trading cash flow and strong balance sheet. • Expansion in emerging markets and low cost countries continues. • Recent acquisitions bedding in well, adding strategically to Laird's market positions and capabilities as well as contributing to the revenue and profits growth. Peter Hill, Chief Executive of Laird, commented: "The first half of 2007 was a milestone in the transformation of Laird into afocused electronics and technology company, with a broad set of complementaryproprietary products and technologies, serving specialist growth markets. Lairdhas made outstanding progress in the first half of 2007, with underlyingoperating profit from continuing operations of £34.1 million, up 38% on 2006 andup 51% at constant exchange rates. We view the full year prospects withconfidence." For enquiries: The Laird Group PLC Maitland Peter Hill, Chief Executive Brian Hudspith Jonathan Silver, Finance Director Charlotte Walsh Tel: 020 7468 4040 Tel: 020 7379 5151 REVIEW OF THE HALF YEAR Strategy Laird is now firmly established as a higher growth, focused electronics andtechnology company. Our strategy is to concentrate on specialist, high growthmarkets where we have, or are able to obtain, a competitive edge. The divestmentof the Security Systems division on 27 April 2007, for a total consideration of£242.5 million and with a gain on sale of £109.4 million, delivered on thatstrategy and achieved two key aims. Shareholder value has been, and willcontinue to be, increased by the redeployment of capital from Laird SecuritySystems into our successful and fast expanding Laird Technologies business.Secondly, shareholders have been able to participate directly in thecrystallisation of value that was realised through the disposal of SecuritySystems through the payment of a special dividend of 50 pence per share on22 June 2007, equivalent to a return of capital of approximately £100 million. Results Laird has delivered another set of strong financial results for the half year. Revenue from continuing operations in the six months to 30 June 2007 was£246.7 million, up 49% (2006, £165.2 million), driven by continuing marketgrowth, increased customer penetration, new product applications and thebenefits of acquisitions. Organic growth from continuing operations was 30%. Underlying operating profit from continuing operations was £34.1 million in thesix months to 30 June 2007, up 38% (2006, £24.7 million), helped by a furtherexpansion of our low cost manufacturing base. Growth at constant exchange rateswas 51%. Profit before tax from continuing operations in the first half of 2007, afterexceptional items, the amortisation of acquired intangibles, the gain or loss onthe disposal of businesses and the fair valuing of financial instruments, was40% higher at £21.2 million (2006, £15.1 million). There were £3.8 million ofexceptional charges in the period (2006, £nil). Total underlying profit before tax in the half year to 30 June 2007, includingfour months' contribution from Security Systems prior to its divestment, was£34.0 million (2006, £32.7 million), with growth of 4% still being achieveddespite the divestment and the adverse effect of currency movements. The effectof the translation of profits into sterling has been to reduce total underlyingprofit in the half year by £3.1 million; at constant exchange rates totalunderlying profit was 14% higher than in the first half of 2006. Return on capital employed for the continuing Group in the six months to 30 June2007 was approximately 14%, well in excess of our pre tax cost of capital. Underlying earnings per share from continuing operations increased by 41% to13.0 pence, (2006, 9.2 pence). Total underlying earnings per share in the firsthalf of 2007 were 14.7 pence (2006, 14.8 pence). The average number of shares inissue in the first half of 2007 was 195.3 million, compared with 181.0 millionin the first half of 2006. A share consolidation, on the basis of 8 new ordinaryshares for every 9 pre-consolidation shares, was effected on 11 June 2007. Theaverage number of shares in issue for the full year 2007 is expected to beapproximately 186.4 million compared with 189.2 million for 2006. Net borrowings at 30 June 2007 were £80.9 million, representing 20% ofshareholders' funds. Interest cover in the half year was 8.6 times, based ontotal underlying operating profit. We are well placed, therefore, to continueour investment programme, both for organic growth and through value-addingacquisitions. There was a trading cash inflow in the half year of £4.2 million, compared withan inflow of £6.7 million in the first half of 2006. Cash spend on acquisitionswas £80.5 million (2006, £78.9 million), while the cash inflow from disposalswas £224.4 million (2006, £3.7 million outflow). There was a return of cash toshareholders in the period of £99.7 million and one off payments into UK definedbenefit pension schemes of £10.2 million, from the proceeds of the SecuritySystems divestment. Dividend The Board's dividend policy is to increase cash returns to shareholdersprogressively over time, considering both the underlying profitability of theGroup and the cash flow requirements of the business. In line with this policy,the Board has declared an interim dividend of 3.62 pence, an increase of 8%(2006, 3.35 pence). This follows the special dividend of 50 pence per share paidon 22 June 2007. Laird Technologies Six months to 30 June 2007 2006 Growth £m £m Revenue 246.7 165.2 49% Underlying operating profit 34.1 24.7 38% Strategic development Laird Technologies is a leader in the design, development, manufacture andsupply of customised, performance critical products for wireless and otheradvanced electronic applications. Its products, often co-designed in conjunctionwith its customers, are critical in protecting or enhancing the performance ofelectronic devices. As well as being the global market leader in electromagneticinterference ("EMI") shielding and cellular handset antennae, Laird Technologiesholds strong positions in a wide range of other technologies, including mobileand infrastructure wireless antennae, thermal interface materials andthermoelectric coolers, mechanical actuation devices, power products, signalintegrity components and complete wireless modules and systems. Higher speed, power and performance of electronic devices, as well as theincreasing trend to wireless connectivity, continue to drive greater intensityand usage of our products. We have over the last few years broadened ourtechnology offering such that we are now able to offer a unique combination ofproducts and solutions. This strategy has also given us access to new, highgrowth market segments, the ability to combine products and exploit technologyconvergence and to increase the content of our offering in individual electronicdevices, and is providing us with a nascent radio frequency ("RF") systemscapability. We strive for technology leadership, working closely with our globaland local OEM customers in design and development, supporting them in theirmultiple locations based on our own global footprint of design, engineering,manufacturing and sales infrastructure. Strong growth in revenues and profits Laird Technologies had a very strong first half in 2007, with revenues up almost50% on 2006. We saw particularly good growth in our revenues into the cellularhandset market, driven both by continuing underlying demand as well as a veryencouraging increase in our average revenue per device. We also saw good growthin revenues from our products for notebook PCs, plasma display panels andconsumer electronics, automotive OEMs, medical devices, and wirelessinfrastructure and systems customers. All of this helped to deliver strongorganic revenue growth in the first half of 2007, of 30%. We have seenparticularly strong organic growth resulting from our entry this year intomechanical actuation devices and decorative metals, the former built on ouracquisition in February this year of M2sys in Korea which has seen verysignificant year on year organic growth, predominantly for the handset market.Excluding these new products, organic growth in the period from our moretraditional product areas was 21%, up from the 19% organic growth achieved inthe first half of 2006. We currently expect these trends to continue into the second half of this year. Over the medium term, we believe that the extent of our capabilities, our product characteristics and underlying demand for our products and solutions should enable Laird Technologies to continue to deliver organic growth at thehistorical levels of 15% to 20% a year. The benefits of acquisitions, the strong organic revenue growth and theincreased levels of production from lower cost countries combined to driveunderlying operating profit in the first half of 2007 up by 38% on 2006. Theeffect of translating profits into sterling has been to reduce the LairdTechnologies operating profit in the half year by some £3.1 million: at constantexchange rates operating profit would have increased by 51%. Laird Technologies' operating margin in the period was 13.8%, compared with15.0% in the first half of 2006. The change is due largely to a change inproduct mix compared with the first half of 2006, with higher relative sales in2007 of mechanical actuation devices and antennae modules, both of which have ahigher material content and thus a lower percentage margin on revenues. We wouldexpect average margins to trend back towards recent historical levels. Serving our customers in global growth markets The largest market for our products in the first half of 2007 was cellularhandsets, accounting for some 50% of revenues. Global handset shipments in 2006were approximately one billion units, and good growth overall is expected in2007 driven by emerging markets demand, increasing functionality and styletrends. In the cellular handset market we supply a range of antennae, includingtri and quad band, 3G, WiFi, Bluetooth and GPS. In addition, we supply EMIshielding, thermal interface materials, mechanical actuation devices, decorativemetals and camera shutters, electrical contacts, and precision stampedsub-decks, either individually or in modules or sub-assemblies which can alsocontain cameras, acoustic boxes and stereo-phonic loudspeakers. Our customersinclude major global OEMs such as Nokia, Motorola, Sony Ericsson and LG, as wellas other more local Asian OEMs and Original Design Manufacturers ("ODMs"). Laird Technologies saw continuing growth in sales into the IT,telecommunications and data communications markets, which in the first half of2007 accounted for some 20% of its revenues. Sales of our EMI shielding andthermal products into the PC notebook market, particularly for Dell and HP,remained strong, and we are starting to supply 90 individual components into anew Apple notebook. We continued to see buoyant sales into the server, printer,networking equipment and telecommunications base station markets, particularlyto Cisco, HP, Huawei and Alcatel, for our EMI shielding, thermal, communicationsantennae, and signal integrity products. Demand for our products into the automotive and transportation sectors accountedfor some 9% of Laird Technologies' revenues in the first half of 2007. We sawgood growth in demand for our antennae products into the OEM market,predominantly for satellite digital radio and often bundled with AM/FM,Bluetooth, GPS and cellular and asset tracking antennae. We continue to developour intelligent transportation systems offering, and we are starting to gaintraction with our EMI shielding, thermal management and signal integrityproducts into the automotive and transportation markets. We are also lookingboth to broaden our base with European and Asian OEMs and to develop integratedwireless systems products for this market. Laird Technologies made further good advances in its other strategic markets(including industrial, instrumentation, medical, military and consumer), whichaccounted for some 21% of total revenues in the first half. We saw particularlygood year on year growth in the supply of our products into the plasma screenand liquid crystal displays for flat screen TVs for Panasonic, Samsung, Hitachiand Phillips, for EMI shielding products into the medical instrumentationmarkets, and thermoelectric cooler sales into the industrial, aerospace andmedical markets. New product introductions are allowing penetration of theMicrosoft Xbox and the Sony Playstation. Sales of our broad range ofcommunications antennae and our wireless systems modules into these widerstrategic markets also remained buoyant. Investing for growth We have established a strong track record, both of achieving organic growth andof successfully finding, integrating and delivering value from acquisitions. Weinvest for organic growth through new product development, increasing ourcomplement of design engineers, sales engineers and application engineers,through new plant construction and capacity expansions, and in new productionequipment. Laird Technologies' capital expenditure in the first half of 2007 was£11.3 million, 4.6% of sales and 20% higher than in the first half of 2006. Wecontinue to invest in research and development, both our own and customerfunded. During the half year, 21 new patents were filed; we currently have closeto 400 patents issued and a further 350 pending. We completed three acquisitions in the first half of 2007. In January weacquired AeroComm Inc. for £19.1 million, providing us for the first time withan entry into the radio frequency ("RF") modules segment to serve the highgrowth markets for embedded wireless communications solutions. In late February2007 we acquired Korea based M2sys Co. Limited for £17.0 million and CushcraftInc. for £45.9 million. M2sys designs and manufactures custom products thatenable mechanical actuation of handheld devices while maintaining electricalintegrity and performance, a new product area for us. Cushcraft expanded ourpresence and capabilities in highly engineered customised RF solutions for OEMlight infrastructure applications in a wide variety of communications marketsincluding WLAN, WISP, WiMax and RFID. Operational and geographic development In the first half of 2007 we completed factory moves into new larger premises inShanghai in China and Penang in Malaysia. These followed our major new plantexpansions and relocations in Beijing, Shenzhen and Tianjin in China in 2006; wehave continued to increase our capacity utilisation in all three of these newplants. We are also expanding our signal integrity products manufacturingcapacity in Shunde, Southern China, acquired with Steward at the end of 2006,including the relocation of Steward's ferrite formulation from the United States. We will begin the transfer of a significant portion of our mechanicalactuation assembly, acquired with M2sys in Korea, to China in the second half ofthis year. In Reynosa, Mexico, we are in the process of relocating to a new,larger 15,000 square metre facility which will be operational later this year. Construction of our new 16,000 square metre facility in the Nokia business parkin Chennai, India, is proceeding on plan with first production scheduled for theend of this year. Also in India, we have announced the creation of LairdTechnologies' Central Research Laboratories which, together with a new salesoffice, will be based in Bangalore. These are the first steps in establishing asizeable presence in India, enhancing significantly our proximity to and supportfor the increasing number of our key customers who are themselves establishingoperations in this fast growing electronics market. We have announced recently a further restructuring of our North American EMIshielding operations, with the closure of our facility at Delaware Water Gap,Pennsylvania, and a significant reduction in manufacturing at St. Louis,Missouri, with the transfer of operations to Mexico and China. These follow theclosure of our thermal products manufacturing facility in Trenton, New Jerseyand the cessation of antennae manufacturing and assembly in Lincoln, Nebraska,which are currently being completed. These measures will provide cost benefitsin 2008 and 2009. In the half year to June 2007, 82% of Laird Technologies' revenues by originwere from Asia, Eastern Europe and Mexico (2006, 69%). At the end of June 2007Laird Technologies had approximately 11,000 employees in 15 countries, with over9,000 in Mexico, Eastern Europe and Asia, and with the majority in China. Laird Security Systems Six months to 30 June 2007 2006 £m £m Revenue 72.9+ 120.9 Underlying operating profit 4.4+ 13.4 + 2007: four months only Laird Security Systems' revenue in the first four months of 2007 prior to itsdisposal was £72.9 million, compared with £120.9 million in the first six monthsof 2006. Underlying operating profit in the first four months of 2007 was£4.4 million, compared with £13.4 million in the first six months of 2006. Theeffect of the translation of profits from Laird Security Systems' US operationsinto sterling was to reduce the divisional underlying operating profit by£0.4 million. Laird Security Systems was divested on 27 April 2007 to Lupus Capital plc. Outlook The first half of 2007 was a milestone in the transformation of Laird into afocused electronics and technology company, with a broad set of complementaryproprietary products and technologies, serving specialist growth markets. Weexpect increasing benefits from our strong customer relationships, our strategicaccount focus, the increasing demand for our unique combination of products andtechnologies, our growing global footprint and our well established, yet stillexpanding, low cost manufacturing base. Laird has made outstanding progress inthe first half of 2007 and we view the full year prospects with confidence. Nigel Keen Peter Hill Chairman Chief Executive 1 August 2007 FINANCE DIRECTOR'S REPORT Revenue Total revenue in the first six months of 2007 increased to £319.6 million from£286.1 million a year earlier. Revenues from continuing operations increased by49%, from £165.2 million in 2006 to £246.7 million in 2007. Revenue from discontinued operations of £72.9 million was for Laird SecuritySystems for the four months in 2007 up to the date of its disposal at the end ofApril. In 2006, revenues were for the full six months and were £120.9 million. Organic revenue growth from continuing operations was 30%, and is measured byrestating 2007 revenue at 2006 exchange rates and then comparing it to revenuein 2006, after including revenue in 2006 for the acquired businesses in theequivalent period not in Laird's ownership. Profit Profit before tax from continuing operations in the first six months of 2007 was£21.2 million (2006, £15.1 million). The profit from discontinued operations of £100.7 million (2006, £10.4 million)includes an exceptional gain of £98.2 million on the disposal of Laird SecuritySystems (Note 6). The total surplus on the disposal was £109.4 million, of which£98.2 million is disclosed within discontinued results and the balance of£11.2 million being the reversal of exchange translation movements since 1January 2005 on the divestment and is disclosed in the Statement of RecognisedIncome and Expense. Total underlying profit before tax in the year was £34.0 million (2006, £32.7million). Underlying profit is defined as profit before tax, exceptional items,amortisation of acquired intangible assets, the gain or loss on sale ofbusinesses and the impact arising from the fair valuing of financialinstruments, as set out in Note 8. There were £3.8 million of exceptional costs in the first six months of 2007(2006, £nil). Laird Technologies incurred restructuring costs of £1.7 million inthe USA and Europe. Early repayment of a US$ Private Placement note resulted inan exceptional finance charge of £1.5 million which arose due to the divestmentof the company which issued the notes as part of the Laird Security Systemsdivestment. The remaining £0.6 million was a charge in relation to restructuringin Laird Security Systems itself. The cash spend on exceptional items in theperiod was £2.2 million. Exceptional costs of £9 million are estimated for thefull year. Finance costs Finance costs, excluding the exceptional finance charge described above, were£4.5 million in the first six months of 2007, compared to £5.4 million in 2006before a fair value adjustment loss in 2006 of £0.7 million. Interest cover was8.6 times, based on total underlying profit. Taxation The underlying tax charge on underlying profit before tax, in the first sixmonths of 2007, is equivalent to an average tax rate of 15.6% (2006, 18.0%). Theunderlying tax rate for continuing operations was 14.5% during the period; inthe medium term, this is expected to rise back towards 18%, as increases inChinese corporate rates and withholding tax rates come into effect. Laird willcontinue to enjoy a relatively low charge in the USA, as goodwill amortisationon acquisitions reduces the tax charge there, and retains tax incentives in theCzech Republic and Malaysia. Underlying Earnings Underlying profit before tax for the first six months of 2007 was 4% up on 2006,with underlying earnings per share 1% lower (Note 8), as a result of more sharesin issue in the first half of 2007, following the 4 for 17 Rights Issuecompleted in April 2006. Underlying earnings are based on underlying profit lessunderlying tax and exclude deferred tax on acquired intangible assets andgoodwill. Cash Flow There was a trading cash flow surplus of £4.2 million in the period. Analysis of cash flow £m £m Discontinued Continuing Operating profit 4.4 34.1 Depreciation / asset disposal gain 1.8 4.8 Other non cash - 0.2 ------- -------- 6.2 39.1 Increase in working capital* (10.9) (8.3) Capital expenditure less disposals (1.9) (11.3) ------- -------- Operating cash flow (6.6) 19.5 ------- -------- Total operating cash flow 12.9 Finance costs (4.9) Taxation (3.8) -------- Trading cash flow surplus 4.2 Dividends (113.6) Net cost of acquisitions and disposals 143.9 Exceptional costs (2.2) Additional pension contributions (10.5) Share issues 3.2 Exchange translation movement 3.2 -------- Reduction in net borrowings 28.2 -------- * after adjusting for creditor increases on exceptional items of £1.4 million. Capital expenditure of £13.2 million (net of disposals of £0.2 million) was £6.6million in excess of depreciation largely due to expansion in capacity to meetdemand in Laird Technologies, with much of the excess occurring in Asia, inparticular in new plants supplying products to customers in China and theconstruction of a new facility in India. Cash tax payments were lower than the tax charge due largely to tax repaymentsin respect of previous years. Net borrowings and debt facilities Overall, there was a £28.2 million reduction in net borrowings as the tradingcash surplus together with the proceeds from the disposal more than offset thespecial dividend payment and the spend on acquisitions. Net borrowings were alsoreduced as a result of translation movements of £3.2 million on foreign currencyloans, largely due to those denominated in US$. Net borrowings at the end ofJune 2007 were £80.9 million, 20% of shareholders' funds. In July 2007, the Group extended the term of its 5 year bilateral revolvingcredit facilities of £195 million from August 2011 to August 2012. Thesefacilities, together with the Group's US$ private placement facilities whichgenerally expire between 2008 and 2016, provide the Group with committedfacilities totalling £276 million. Currency The average and period end exchange rates are set out in Note 4. A significantproportion of the Group's revenues are in US$ or currencies which are linked tothe US$. Each US$0.01 movement approximates to an annual impact of £375,000 onprofit for the Group. The impact of these movements was to reduce the totalunderlying profit for the period by £3.1 million, when compared to a yearearlier. The majority of the Group's assets are held overseas and these are hedged inpart by foreign currency loans. Pensions The Group's defined benefit pension schemes' deficit has fallen from £10.9million at the beginning of the year to £4.8 million at the end of the period.The principal changes in actuarial assumptions were an increase in the bond rateused to discount liabilities to 5.8% from 5.1% in December 2006, resulting in areduction in the deficit of £9.9 million, and this is offset in part by anincrease in the inflation assumption which added £2.1 million to the deficit. Additional special contributions of £10.5 million were made into the Group'sdefined benefit pension schemes, of which £10.2 million related to the disposalof Laird Security Systems. As a pension fund is in surplus and as the accounting standards do not currentlyallow the Group to recognise pension scheme surpluses on the Group's balancesheet, £13.6 million of assets are not recognised and are disclosed as an assetceiling adjustment. Following the disposal of Laird Security Systems, there arenow only 16 active members of the Group's defined benefit plans. Shareholders' Funds Shareholders' funds at the end of June 2007 were £415.3 million (31 December2006, £408.7 million). The reconciliation is set out in Note 10. Jonathan SilverFinance Director 1 August 2007 Independent review report to The Laird Group PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 that comprises the Group income statement,Statement of recognised income and expense, Group balance sheet, Group cash flowstatement and the related Notes 1 to 13. We have read the other informationcontained in the Interim Report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept 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, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the Interim Report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except whereany changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Auditing Standards (UK and Ireland) and therefore provides a lowerlevel of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review, we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Ernst & Young LLP1 More London PlaceLondonSE1 2AF 1 August 2007 Group income statement(unaudited) 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Note Continuing operations 3 Revenue 246.7 165.2 370.6 -------- -------- -------- Operating profit before amortisation 34.1 24.7 55.4 of acquired intangible assets and exceptional items Amortisation of acquired intangible (5.2) (3.5) (6.1) assets 5 Exceptional items (1.7) - - -------- -------- -------- Operating profit 27.2 21.2 49.3 Finance revenue 2.3 0.9 2.1 Finance costs (7.1) (6.4) (12.5) Financial instruments - fair value - (0.7) 0.2 adjustment Other finance revenue - pension 0.3 0.1 0.5 5 Exceptional finance costs (1.5) - - -------- -------- -------- Profit before tax from continuing 21.2 15.1 39.6 operations 8 Taxation (3.9) (3.9) (8.8) -------- -------- -------- Profit for the period from continuing 17.3 11.2 30.8 operations Discontinued operations 6 Profit for the period from 100.7 10.4 19.9 discontinued operations -------- -------- -------- Profit for the period 118.0 21.6 50.7 -------- -------- -------- 7 Earnings per share Basic from continuing operations 8.9p 6.2p 16.3p Diluted from continuing operations 8.8p 6.1p 16.2p Basic on profit for the period 60.4p 11.9p 26.8p Diluted on profit for the period 59.9p 11.8p 26.6p 8 Underlying profit before tax* Continuing 29.6 19.3 45.5 Total 34.0 32.7 73.3 Basic earnings per share* Continuing 13.0p 9.2p 20.7p Total 14.7p 14.8p 31.7p 9 Dividends declared Dividends 106.1 6.6 20.5 Dividend per share 53.62p 3.35p 10.30p *before amortisation of acquired intangible assets, exceptional items, deferredtax on acquired intangible assets and goodwill, the gain or loss on disposal ofbusinesses, and the impact arising from the fair valuing of financialinstruments Statement of recognised income and expense(unaudited) 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 Note £m £m £m Profit for the period 118.0 21.6 50.7 13 Actuarial (losses) / gains on (6.1) 4.3 4.2 retirement benefit obligations Exchange differences on retranslation (10.7) (28.4) (48.4) of overseas net investments Exchange losses transferred to 11.2 - - discontinued in income statement Exchange differences on net investment 4.1 9.7 17.8 hedges Financial instruments - loss on cash - - (0.3) flow hedges taken to equity Tax on exchange differences (0.4) (0.2) (1.1) -------- -------- -------- Total income and expense recognised (1.9) (14.6) (27.8) directly in equity -------- -------- -------- Total income and expense recognised for 116.1 7.0 22.9 the period -------- -------- -------- Group balance sheet(unaudited) As at As at As at 30 June 30 June 31 Dec 2007 2006 2006 Note £m £m £m Assets Non-current assets Property, plant and equipment 66.2 83.8 86.6 Intangible assets 450.8 410.6 429.7 Deferred tax assets 0.2 0.2 0.1 Other non-current assets 3.2 2.9 3.5 ------- ------- ------ 520.4 497.5 519.9 ------- ------- ------ Current assets Inventories 43.4 66.0 69.6 Trade and other receivables 125.6 117.5 123.5 Income tax receivable 4.3 0.1 0.7 Cash 53.0 82.0 44.0 ------- ------- ------ 226.3 265.6 237.8 ------- ------- ------ Liabilities Current liabilities 12 Borrowings (3.4) (5.7) (4.9) Derivative financial instruments - - (0.3) Trade and other payables (110.6) (94.5) (108.2) Current tax liabilities (4.1) (3.4) (2.5) Provisions (0.4) (3.7) (0.9) ------- ------- ------ (118.5) (107.3) (116.8) ------- ------- ------ Net current assets 107.8 158.3 121.0 ------- ------- ------ Non-current liabilities 12 Borrowings (130.5) (185.0) (148.2) Derivative financial instruments (1.2) (2.1) (1.2) Income tax payable (18.6) (15.6) (22.7) Deferred tax liabilities (46.2) (24.9) (33.7) 13 Retirement benefit obligations (4.8) (11.8) (10.9) Other non-current liabilities (5.8) (5.6) (5.9) Provisions (5.8) (12.3) (9.6) ------- ------- ------ (212.9) (257.3) (232.2) ------- ------- ------ Net assets 415.3 398.5 408.7 ------- ------- ------ Capital and reserves Equity share capital 49.8 49.5 49.5 Share premium 268.8 265.7 266.0 Retained earnings 153.8 133.2 154.9 Translation reserve (54.4) (47.1) (59.0) Treasury shares (2.7) (2.8) (2.7) ------- ------- ------ 10 Total shareholders' equity 415.3 398.5 408.7 ------- ------- ------ Group cash flow statement(unaudited) 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 Note £m £m £m 11 Cash flows from operating activities Cash generated from operations 14.0 24.3 80.8 Tax paid (3.8) (1.1) (3.4) ------- ------- ------ Net cash flows from operating 10.2 23.2 77.4 activities ------- ------- ------ Cash flow from investing activities Interest received 2.7 0.9 2.1 11 Acquisition of businesses (net of cash (80.5) (67.0) (102.0) acquired) Purchase of property, plant and (13.4) (12.4) (22.9) equipment 11 Inflow / (outflow) from sale of 224.4 (3.7) (8.5) businesses Proceeds from sales of property, plant 0.2 0.6 3.4 and equipment ------- ------- ------ Net cash flows from investing 133.4 (81.6) (127.9) activities ------- ------- ------ Cash flows from financing activities Interest paid (9.0) (6.2) (11.8) Net proceeds from issue of ordinary share 3.2 118.3 118.5 capital Movement in treasury shares - (0.8) (0.7) (Decrease) / increase in borrowings (15.0) 21.4 (11.4) Dividends paid to shareholders (113.6) (12.8) (19.4) ------- ------- ------ Net cash flows from financing (134.4) 119.9 75.2 activities ------- ------- ------ Effects of movements in foreign exchange (0.3) (1.3) (2.4) rates ------- ------- ------ 12(a) Increase in cash and cash equivalents for 8.9 60.2 22.3 the period Cash and cash equivalents brought 44.0 21.7 21.7 forward ------- ------- ------ Cash and cash equivalents carried 52.9 81.9 44.0 forward ------- ------- ------ Notes to the Interim Report(unaudited) 1 Authorisation of interim financial statements The Group's interim financial statements for the period ended 30 June 2007 wereauthorised for issue by the Board of Directors on 1 August 2007. The Laird GroupPLC is a public limited company incorporated and domiciled in England and Walesand its ordinary shares are traded on the London Stock Exchange. The comparative financial information for the period to 30 June 2006 and theyear ended 31 December 2006 has been extracted from the published financialstatements of The Laird Group PLC. The consolidated interim financialinformation does not constitute statutory accounts within the meaning of Section240 of the Companies Act 1985. These interim results are unaudited but have beenreviewed by the Group's auditors. The statutory accounts for the year ended 31December 2006 have been reported on by the Group's auditors and delivered to theregistrar of companies. The report of the auditors was unqualified and did notcontain the statements under section 237(2) or (3) of the Companies Act 1985. Further copies of the Interim Report may be obtained from The Laird Group'sregistered office at 100 Pall Mall, London SW1Y 5NQ. 2 Basis of preparation The Laird Group PLC prepares its Annual Report and Accounts on the basis of IFRSas adopted for use by the EU. The financial information presented in thisInterim Report has been prepared in accordance with the accounting policiesexpected to be used in preparing the 2007 Annual Report and Accounts which donot differ significantly from those used in the preparation of the 2006 AnnualReport and Accounts. The Group has elected not to adopt IAS 34 Interim FinancialReporting early. Certain prior period amounts have been reclassified to conform to the 2007presentation. 3 Segmental analysis Primary reporting format - business segments Laird Technologies Laird Security Systems Total 6 6 12 6 6 12 6 6 12 months months months months months months months months months to to to to to to to to to 30 30 31 30 30 31 30 30 31 June June Dec June June Dec June June Dec 2007 2006 2006 2007 2006 2006 2007 2006 2006 £m £m £m £m £m £m £m £m £m Continuing operations Revenue 246.7 165.2 370.6 - - - 246.7 165.2 370.6 ------ ------ ------ ------ ------ ------ ------ ------ ------Segment result before: 34.1 24.7 55.4 - - - 34.1 24.7 55.4 Amortisation of acquired (5.2) (3.5) (6.1) - - - (5.2) (3.5) (6.1) intangible assets Exceptional items (1.7) - - - - - (1.7) - - ------ ------ ------ ------ ------ ------ ------ ------ ------ 27.2 21.2 49.3 - - - 27.2 21.2 49.3 ------ ------ ------ ------ ------ ------ Finance revenue 2.3 0.9 2.1 Finance costs (7.1) (6.4) (12.5) Fair value adjustment - (0.7) 0.2 on interest rate swap Other finance 0.3 0.1 0.5 revenue - pension Exceptional finance costs (1.5) - - ------ ------ ------Profit before tax 21.2 15.1 39.6 Taxation (3.9) (3.9) (8.8) ------ ------ ------Profit for the period from 17.3 11.2 30.8 ------ ------ ------continuing operations Discontinued operations Revenue - - - 72.9 120.9 237.7 72.9 120.9 237.7 ------ ------ ------ ------ ------ ------ ------ ------ ------Segment result before: - - - 4.4 13.4 27.8 4.4 13.4 27.8 Amortisation of acquired - - - (0.3) - (1.0) (0.3) - (1.0) intangible assets Exceptional items - - - (0.6) - - (0.6) - - Profit / loss on disposal - - - 98.2 - - 98.2 - - ------ ------ ------ ------ ------ ------ ------ ------ ------Profit / loss before tax - - - 101.7 13.4 26.8 101.7 13.4 26.8 Taxation - - - (1.0) (3.2) (7.4) (1.0) (3.2) (7.4) ------ ------ ------ ------ ------ ------ ------ ------ ------Profit / loss for the period - - - 100.7 10.2 19.4 100.7 10.2 19.4 from discontinued operations ------ ------ ------ ------ ------ ------ Loss before tax on prior - (1.9) (2.1) period disposal* Taxation * - 2.1 2.6 ------ ------ ------ 100.7 10.4 19.9 ------ ------ ------Profit for the period 118.0 21.6 50.7 ------ ------ ------ * These relate to other business segments disposed of in periods prior to 2007. 4 Exchange rates The results and cash flows of overseas subsidiaries are translated into sterlingusing weighted average rates of exchange for the period. The principal ratesused were as follows: Average Closing 6 months 6 months 12 months to to to At At At 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2007 2006 2006 2007 2006 2006 Euros 1.48 1.46 1.47 1.49 1.45 1.48 US dollars 1.97 1.79 1.85 2.01 1.85 1.96 Renminbi 15.21 14.39 14.70 15.28 14.79 15.82 5 Exceptional items 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Continuing operations: Laird Technologies Restructuring costs (1.7) - - Finance costs incurred on early repayment (1.5) - - of private placement debt Discontinued operations: Laird Security Systems Restructuring costs (0.6) - - ------ ------ ------ (3.8) - - ------ ------ ------ 6 Discontinued operations 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Results from discontinued operations: Revenue 72.9 120.9 237.7 ------ ------- -------Operating profit before: 4.4 13.4 27.8 Amortisation of acquired intangible (0.3) - (1.0) assets Exceptional items (0.6) - - Taxation (1.0) (3.2) (7.4) ------ ------- -------Profit after tax from discontinued 2.5 10.2 19.4 operations Profit on disposal of businesses: Profit before transfer from translation 109.4 - - reserve Transfer from translation reserve (11.2) - - ------ ------- -------Profit on current period disposals 98.2 - - Loss on prior year disposals - (1.9) (2.1) Taxation - 2.1 2.6 ------ ------- -------Profit after tax on disposals 98.2 0.2 0.5 ------ ------- -------Profit from discontinued operations 100.7 10.4 19.9 ------ ------- ------- 7 Earnings per share The calculation of basic and diluted earnings per share is based on the profitfor the period divided by the daily average of the number of shares in issueduring the period. Diluted earnings per share is based on the same profits butwith the number of shares increased to reflect the daily average effect ofrelevant share options granted but not yet exercised where performanceconditions have been met and shares contingently issuable. 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Profit Profit after tax from continuing 17.3 11.2 30.8 operations Profit from discontinued operations 100.7 10.4 19.9 ------ ------- -------Profit for the period 118.0 21.6 50.7 ------ ------- ------- Number Number Number of shares ofshares of shares (m) (m) (m) Weighted average shares Basic weighted average shares 195.3 181.0 189.2 Options 1.7 2.4 1.5 Contingent shares - 0.1 - ------ ------- -------Diluted weighted average shares 197.0 183.5 190.7 ------ ------- ------- Pence Pence Pence Earnings per share Basic from continuing operations 8.9 6.2 16.3 ------ ------- -------Diluted from continuing operations 8.8 6.1 16.2 ------ ------- -------Basic from discontinued operations 51.5 5.7 10.5 ------ ------- -------Diluted from discontinued operations 51.1 5.7 10.4 ------ ------- -------Basic on profit for the period 60.4 11.9 26.8 ------ ------- -------Diluted on profit for the period 59.9 11.8 26.6 ------ ------- ------- 8 Underlying results and taxation Underlying profit and earnings per share are shown as the Board considers themto be relevant guides to the performance of the Group. 6 months 6 months 12 months to to to 30 June 30 June 31 December 2007 2006 2006 £m £m £m Profit Continuing operating profit before 34.1 24.7 55.4 amortisation of acquired intangible assets and exceptional items Finance revenue 2.3 0.9 2.1 Finance costs (7.1) (6.4) (12.5) Other finance revenue - pension 0.3 0.1 0.5 ------ ------- -------Continuing underlying profit before tax 29.6 19.3 45.5 Discontinued operating profit before 4.4 13.4 27.8 amortisation of acquired intangible assets ------ ------- -------and exceptional items Total underlying profit before tax 34.0 32.7 73.3 ------ ------- -------Tax The underlying tax charge is calculated as follows: Underlying tax on continuing operations 4.3 2.7 6.3 Underlying tax on discontinued operations 1.0 3.2 7.0 ------ ------- -------Total underlying tax 5.3 5.9 13.3 Continuing underlying tax rate 14.5% 14.0% 13.8% Total underlying tax rate 15.6% 18.0% 18.1% Tax relief on exceptional items (1.2) - - Deferred tax on goodwill and acquired 0.8 1.2 2.5 intangible assets Tax on prior period discontinued - (2.1) (2.2) operations ------ ------- -------Total tax charge 4.9 5.0 13.6 ------ ------- -------Analysis of tax charge: Tax on profit from continuing operations 3.9 3.9 8.8 Tax on discontinued operations 1.0 1.1 4.8 ------ ------- -------Total tax charge 4.9 5.0 13.6 ------ ------- ------- Earnings per share Pence Pence Pence Continuing underlying earnings per share - 13.0 9.2 20.7 basic ------ ------- -------Total underlying earnings per share - 14.7 14.8 31.7 basic ------ ------- -------Total underlying earnings per share - 14.6 14.6 31.5 diluted ------ ------- ------- The tax charge for the period has been based on the estimated tax rate for thefull year and the amount of overseas tax charged in the period was £4.9m (June2006, £6.7m, December 2006, £15.6m). 9 Dividends paid and declared On 1 August 2007 the Board declared an interim dividend of 3.62p per share(2006, 3.35p). The interim dividend will be paid on 2 November 2007 toshareholders registered on 5 October 2007. Dividends are recorded in thefinancial statements at the earlier of the date they become a legal obligationof the Company and the date that they are paid. Total Dividends Dividends paid Dividends declared* 6 6 12 6 6 12 months months months months months months To To to to to to 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2007 2006 2006 2007 2006 2006 £m £m £m £m £m £m Final 2005 - 12.8 12.8 - - - Interim 2006 - - 6.6 - 6.6 6.6 Final 2006 13.9 - - - - 13.9 Special 2007 99.7 - - 99.7 - - Interim 2007 - - - 6.4 - - ----- ----- ----- ----- ----- ----- 113.6 12.8 19.4 106.1 6.6 20.5 ----- ----- ----- ----- ----- ----- Dividends per share Dividends paid Dividends declared 6 6 12 6 6 12 months months months months months months to to to to to To 30 June 30 June 31 Dec 30 June 30 June 31 Decr 2007 2006 2006 2007 2006 2006 Pence Pence Pence Pence Pence Pence Final 2005 - 6.45 6.45 - - - Interim 2006 - - 3.35 - 3.35 3.35 Final 2006 6.95 - - - - 6.95 Special 2007 50.00 - - 50.00 - - Interim 2007 - - - 3.62 - - ----- ----- ----- ----- ----- ----- 56.95 6.45 9.80 53.62 3.35 10.30 ----- ----- ----- ----- ----- ----- * attributable to the period 10 Reconciliation of movements in equity 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Opening balance for the period 408.7 284.3 284.3 Total recognised income and expense for 116.1 7.0 22.9 the period Rights Issue of shares - 117.5 117.6 Exercise of share options 3.2 0.8 1.0 Issue of shares on acquisition of - 1.5 1.4 businesses Share based payments 0.9 1.0 1.6 Treasury shares - (0.8) (0.7) Dividends paid (113.6) (12.8) (19.4) ------- ------- -------Total shareholders' equity 415.3 398.5 408.7 ------- ------- ------- On 11 June 2007 a consolidation of the Company's share capital took effectwhereby every nine of the issued and unissued Ordinary Shares of the Companywith a nominal value of 25 pence each were consolidated into eight New OrdinaryShares in the Company with a nominal value of 28.125p each. The purpose of theshare consolidation was to ensure that (subject to normal market movements) themarket price of each New Ordinary Share was approximately the same as the marketprice of each existing Ordinary Share (thereby allowing comparability inearnings per share and share prices with prior financial periods) following thepayment of the special dividend of 50p per share on 22 June 2007. 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 2007 2006 2006 £m £m £m Net profit after taxation 17.3 11.2 30.8 Depreciation and other non-cash items Depreciation 4.8 3.9 7.9 Amortisation of capitalised development 0.9 0.5 1.0 costs Capitalised development costs (1.6) (1.0) (3.5) Share based payments 0.9 1.0 1.6 Amortisation of acquired intangible 5.2 3.5 6.1 assets Financial instruments - fair value - 0.7 (0.2) adjustment Pension (income) / charges (0.4) 0.4 0.7 Other net finance costs 6.0 5.4 9.9 Taxation 3.9 3.9 8.8 Pension contributions (11.5) (0.7) (2.9) Changes in working capital Inventories (9.6) (3.7) (2.4) Trade and other receivables (14.8) (4.7) (17.7) Trade, other payables and provisions 18.2 (4.0) 13.2 ------ ------ ------ (6.2) (12.4) (6.9) ------ ------ ------Cash generated from continuing operations 19.3 16.4 53.3 ------ ------ ------ Discontinued operations Net profit after taxation 100.7 10.4 19.9 (Profit) / loss on disposal of businesses (98.2) 1.9 2.1 before taxation Depreciation and other non-cash items Depreciation 1.8 2.7 5.3 Profit on disposal of fixed assets - (0.6) (0.7) Amortisation of acquired intangible 0.3 - 1.0 assets Taxation 1.0 1.1 4.8 Changes in working capital (10.9) (7.6) (4.9) ------ ------ ------ (5.3) 7.9 27.5 ------ ------ ------Cash flow from discontinued operations ------ ------ ------Cash generated from operations 14.0 24.3 80.8 ------ ------ ------ Working capital movements from continuing operations are after creditorincreases of £1.4m (2006, £nil) in respect of exceptional costs of redundancyand restructuring. 11 Additional cash flow information (continued) Net cash outflow on acquisitions and disposals 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Acquisition of businesses Consideration: Cash consideration (81.5) (61.7) (97.6) Net cash acquired 1.6 0.2 0.9 ------ ------ ------ (79.9) (61.5) (96.7) Deferred consideration paid (0.6) (5.5) (5.3) ------ ------ ------Net cash outflow on acquisition of (80.5) (67.0) (102.0) businesses ------ ------ ------Borrowings acquired - (11.9) (11.6) ------ ------ ------Disposal of businesses Consideration: Net cash consideration 223.7 (3.7) (8.5) Net cash disposed of (0.1) - - Borrowings disposed of 0.8 - - ------ ------ ------Net cash inflow / (outflow) on disposal 224.4 (3.7) (8.5) of businesses ------ ------ ------ 12 Borrowings (a) Reconciliation of net borrowings At At At 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Increase in cash and cash equivalents 8.9 60.2 22.3 (net of bank overdrafts) during the period Movement in borrowings 15.0 (21.4) 11.4 Borrowings of businesses acquired - (11.9) (11.6) Borrowings of businesses disposed of 0.8 - - Differences on exchange on borrowings 3.5 12.5 16.9 ------- ------- -------Movement in net borrowings during the 28.2 39.4 39.0 period Net borrowings brought forward (109.1) (148.1) (148.1) ------- ------- -------Net borrowings carried forward (80.9) (108.7) (109.1) ------- ------- ------- Cash and cash equivalents (net of bank 52.9 81.9 44.0 overdrafts) Other current borrowings (3.3) (5.6) (4.9) Non-current borrowings (130.5) (185.0) (148.2) ------- ------- -------Net borrowings carried forward (80.9) (108.7) (109.1) ------- ------- ------- (b) Committed borrowing facilities The Group had total committed loan facilities of £283.0m at 30 June 2007 (2006,£309.1m), of which £269.8m (2006, £290.9m) was available for more than threeyears and £132.9m was drawn at 30 June 2007 (30 June 2006, £188.8m). Committedfacilities include £7.0m (30 June 2006, £11.4m) of promissory notes issued tothird parties in part satisfaction of acquisition consideration. 13 Retirement benefit obligations A review of the main assumptions affecting the Group's defined benefitobligations was carried out at 30 June 2007, by the Group's actuaries. There are minor variations in the assumptions used by the different actuariesemployed to value the separate schemes. The expected long term rates of returnon gilts and bonds are estimated at 4.8% per annum (December 2006, 4.8%) andthose for equities at 7.8% per annum (December 2006, 7.8%). The mortality assumption used at 30 June is the same as that used at 31 December2006. This is based on 92 series tables with an allowance for improvements inline with the medium cohort based on each member's year of birth. For IAS 19 the schemes' liabilities have been calculated under the projectedunit method and the main financial assumptions were inflation of 3.2% per annum(December 2006, 3.0%), salary increases of 4.2% per annum (December 2006, 4.0%)and a discount rate for liabilities of 5.8% per annum (December 2006, 5.1%). The change in the overall deficit and the impact of these changes can be seenbelow: 6 months 6 months 12 months to to to 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m Defined benefit liability at period (10.9) (16.4) (16.4) start Net pension income / (expense) 0.5 (0.6) (1.0) Employer contributions 11.0 1.0 3.2 Benefits paid directly by Company 0.7 - - Actuarial gain 7.5 4.3 4.2 Currency impact - (0.1) - Asset ceiling adjustment (13.6) - (0.9) ------- ------- -------Defined benefit liability at period end (4.8) (11.8) (10.9) ------- ------- ------- The charge of £6.1m recognised in the SORIE for the period is comprised of the£7.5m gain recognised on actuarial assumptions, less the £13.6m asset ceilingadjustment being the surplus on a pension scheme which cannot be recognisedunder IAS 19. Contributions of £11.0m in the period included £10.5m ofadditional special contributions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Laird