2nd Aug 2006 07:01
Laird Group PLC02 August 2006 2 August 2006 THE LAIRD GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2006 2006 2005 £m £m Revenue- Continuing operations 286.1 232.2 +23%- Discontinued operations - 14.0 --------- --------- 286.1 246.2 +16% Underlying profit before tax (i) 32.7 24.1 +36%Profit before tax from continuing 28.5 16.1 +77%operationsNet borrowings 108.7 158.1Shareholders' funds 398.5 275.1 p/share p/share* Underlying earnings (i) 14.8 12.0 +23%Basic earnings from continuing 11.8 7.3 +62%operationsDividend 3.35 3.11 +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. ii) The narrative that follows is based on underlying operating profit, profitbefore tax and earnings per share, as the Directors believe that these provide amore consistent measure of operating performance. iii) The weighted average number of shares used to calculate earnings anddividends per share was 181.0 million in the first half of 2006 and166.7 million in the first half of 2005. * 2005 adjusted for bonus element of the 4 for 17 Rights Issue. Highlights • Revenue from continuing operations increased by 23% to £286.1 million (2005, £232.2 million) with organic revenue growth for the Group of 8%. • Underlying profit before tax of £32.7 million, up 36% compared with £24.1 million in 2005. • Profit before tax from continuing operations of £28.5 million, up 77% compared with £16.1 million in 2005. • Underlying earnings per share of 14.8 pence, up 23% compared with 12.0 pence in 2005. • An interim dividend of 3.35 pence per share, up 8% on the restated interim dividend for 2005. • Healthy trading cash flow and strong balance sheet. • Excellent result from Laird Technologies, with strong organic revenue growth of 19% and underlying operating profits up nearly 60%. • Laird Security Systems' profits level on the first half of 2005, with benefits to come from cost reduction actions, programme wins and new product introductions. • Expansion in emerging markets and low cost countries continues, with new plants in China and Mexico in 2006 and India in 2007. • Recent acquisitions performing well, adding strategically to the Group's market positions and capabilities as well as delivering revenue and profits growth. Peter Hill, Chief Executive of Laird, commented: "Laird has again made good progress in the first half of 2006, maintaining themomentum established in recent years. Underlying profit before tax increased by36% to £32.7 million, while underlying earnings per share increased by 23%, to14.8 pence. The Group continues to be developed strategically and is wellpositioned to make further progress during the second half of this year." For enquiries: The Laird Group PLC Maitland Peter Hill, Chief Executive Charlotte Barker Jonathan Silver, Finance Director Tel: 07813 889660 Tel: 020 7468 4040 REVIEW OF THE HALF YEAR Strategic Development Laird is successfully pursuing a strategy of focusing on specialist highergrowth markets, obtaining a competitive edge through technology and customerservice allied to a well established, and still expanding, low costmanufacturing base. Our global reach provides advantages compared to many of ourmore regional or local competitors. The Group is now focused on its two marketleading Divisions, Laird Technologies and Laird Security Systems which havebeen, and will continue to be, strengthened and expanded through both organicinvestment and acquisitions. The Laird strategy is one driven by the overridingobjective of creating and growing shareholder value. Delivery of Profitable Growth Laird has made good progress during the first half of 2006, sustaining themomentum established in recent years. Revenue in the six months to 30 June 2006 was £286.1 million, up 23% on therevenue from continuing operations of £232.2 million, and up 16% on the totalrevenue of £246.2 million, in the first half of 2005. Organic growth fromcontinuing operations was 8%. Underlying profit before tax was £32.7 million in the six months to 30 June2006, 36% up on the £24.1 million in the first half of 2005, driven by aparticularly strong performance from Laird Technologies. The Group's operating profit margin increased to 13.3%, from 11.9% in the firsthalf of 2005, as a result of organic growth and a greater proportion ofmanufacturing from low cost countries. Profit before tax from continuing operations in the first half of 2006 was£28.5 million, up 77% compared with the £16.1 million in the same period lastyear. There were no exceptional charges in the period (2005, £6.0 million). Underlying earnings per share in the first half of 2006 were 14.8 pence, 23% upon the restated 12.0 pence in the first half of 2005. Net borrowings at 30 June 2006 were £108.7 million, representing 27% ofshareholders' funds. Interest cover in the half year was 7.1 times. The Group'scapital base was strengthened in the first half of 2006 by the 4 for 17 RightsIssue, which raised approximately £118 million (net of expenses). There was a trading cash inflow in the half year of £6.7 million, compared withan outflow of £0.6 million in the first half of 2005. There was a cash outflowon acquisitions and disposals in the half year of £82.6 million compared with£18.9 million in the first half of 2005, and a cash spend in the period, onprior year exceptional charges, of £0.3 million compared with £3.1 million inthe first half of 2005. Continuing Dividend Growth The Board's policy is to increase cash returns to shareholders progressivelyover time, considering both the underlying profitability of the Group and thecash flow requirements of the business. In line with this policy, we havedeclared an interim dividend of 3.35 pence, an increase of 8% on the 3.11 pencefor the period to 30 June 2005, which has been restated as a result of the4 for 17 Rights Issue. Laird Technologies Six months to 30 June 2006 2005 Growth £m £m Revenue 165.2 118.6 39% Underlying operating profit 24.7 15.5 59% Laird Technologies is a leader in the design, development, manufacture andsupply of customised, performance critical products for wireless and otheradvanced electronic applications. Laird Technologies had an excellent first half in 2006. Strong demand across allits markets, in particular those for cellular handsets, notebook PCs and plasmadisplay panels, helped deliver strong organic revenue growth in the first halfof 2006, of 19%. Laird Technologies has also benefited from the acquisitionsmade in late 2005 and in March 2006, with the result that Laird Technologies'revenue in the six months to 30 June 2006 increased by 39% compared to the firsthalf of 2005, to £165.2 million. 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 period to £24.7 million, an increase of 59%compared to the first half of 2005. Laird Technologies' operating margin in theperiod grew to 15.0%, up from 13.1% in the first half of 2005. Laird Technologies now owns a broad and complementary range of products andtechnologies, which we continue to expand. These currently include acomprehensive range of electromagnetic interference (EMI) shielding products,thermal interface materials, thermoelectric coolers, power products and a widerange of wireless antennae: cellular, satellite radio, GPS, Bluetooth, WiFi andother antennae for fixed and mobile communications. The convergence of a numberof these products in a single electronic device is creating new businessopportunities. Cellular Handsets The largest market for our products is currently cellular handsets. We supply arange of antennae and EMI shielding products to the major global OEMs, and weare now also combining thermal interface materials in 3G applications. Revenuesinto this market accounted for nearly 45% of Laird Technologies' revenue in thefirst half of 2006. The worldwide cellular handset market experienced strong growth in the firsthalf of 2006, driven by emerging markets' demand, increasing functionality andstyle. Industry projections are for further growth in the second half, albeit ata lower rate than in the first, but with 2006 again projected to be a recordyear for global handset shipments. Laird Technologies is particularly well placed to benefit from this growth withits range of complementary products and technologies, its technical and radiofrequency (RF) design expertise, its global footprint and its ability to movequickly from design to rapid prototyping and high volume production. We workclosely with our global OEM customers, supporting them in their multiplelocations. In the second half of 2006 we also expect to benefit from newprogramme wins and from the higher value added products we will be supplying. IT, Telecomms and Datacomms Laird Technologies saw continuing growth in the IT, telecommunication and datacommunications markets, which in the first half of 2006 accounted for nearly 30%of its revenues. Sales of our products into the server and networking equipmentmarkets remained buoyant, while our sales into the PC notebook market againshowed good growth as we continued to benefit from the acquisition of Cateron in2005. Automotive and Transportation The first half of 2006 saw significant Laird Technologies' sales into theautomotive and transportation markets for the first time as a result of theacquisition of RecepTec in March this year. These markets accounted forapproximately 10% of Laird Technologies' revenue in the first half. RecepTecitself, which demonstrated organic revenue growth of approaching 30%, isperforming well and has won new OEM contracts for 2008 platforms. LairdTechnologies is well placed to benefit from the increasing intensity ofelectronic content in these markets. Other Strategic Markets Laird Technologies' sales into its other strategic markets (industrial,consumer, military and security, medical, and other markets) accounted for some15% of its revenues. We saw strong growth into the plasma display panels market,obtaining design wins in both Korea and Japan for our products which will bemanufactured in China, Central Europe and North America. Thermoelectric coolersales of Melcor, acquired in late 2005, into the industrial, medical andaerospace markets grew strongly, as did the wide range of communicationsantennae supplied by Antenex which was acquired in March this year. Both ofthese acquisitions are performing in line with expectations. Operations Laird Technologies continues to expand its global reach, at the same time asexpanding its capacity and production in lower cost countries. At June 2006, 80%of Laird Technologies' 8,000 employees were located in Asia and Central Europe. The first half of 2006 saw the openings of major new plants in Beijing andShenzhen in China, while our Tianjin facility was relocated to larger premises.We are also planning relocations and expansion of our facilities in Shanghai,China and Penang, Malaysia. These moves expand significantly our manufacturing capacity in Asia and provideeconomies of scale, as well as expansion space for the next two to three years. Laird Technologies recently opened its first plant in Mexico. Initiallymanufacturing antennae, our presence there will be expanded gradually to cover awider range of Laird Technologies' products. Laird Technologies is awaiting final Indian Government approval for the opening,in early 2007, of a technical sales office and manufacturing facility inChennai. This will strengthen further our proximity and support capabilities tokey customers with operations in India. The establishment of this new facilityand organisation is the start of what we anticipate to be a much more extensivepresence for Laird Technologies in the rapidly growing Indian electronicsmarket. Outlook Laird Technologies is now benefiting from the much wider breadth of its productrange, the depth of its technical design and manufacturing capabilities, and itscontinuously expanding global footprint. We expect further growth in its enduser markets which will leave Laird Technologies well placed to build on itssuccess in the first half. Laird Security Systems Six months to 30 June 2006 2005 Growth £m £m Revenue 120.9 113.6 6% Underlying operating profit 13.4 13.6 (2%) Laird Security Systems is a leader in the design, development, manufacture anddistribution of innovative products and solutions. These aim to improveperformance and thermal efficiency, and enhance protection and security, forhomes and buildings within the UK and USA residential building and homeimprovement markets. Laird Security Systems achieved revenue growth of 6% in the first half of 2006,while underlying operating profit was marginally below the record profits seenin the first half of 2005. Organic revenue growth declined by some 4% across theDivision as a whole compared with the first half of 2005, with a decline in the UK but with the US again showing positive organic growth. Revenue from continuing operations in the six months to 30 June 2006 was£120.9 million, compared with £113.6 million in the first half of 2005.Underlying operating profit, at £13.4 million in the half year, was marginallybelow the record level of £13.6 million achieved in the same period of 2005. Thefirst half underlying operating profit was negatively impacted by approximately£1.6 million of one-off restructuring charges and the adverse effect ofcommodity price movements. We currently expect that the full year charge for theeffect of these will not be significantly higher than that already taken in thefirst half. UK UK revenue in the first half of 2006, of approximately £63 million, was down 11%compared with the first half of 2005 on a like for like basis, but level with that in the second half of last year. The reduction year on year was seen in window hardware (which accounted for justover 30% of UK revenue) and in windows, conservatories and associated products(which together accounted for a little over 15% of UK revenue). However, new contracts are being won and the benefits of these will begin to be seen in the second half. We have continued to restructure our operations with the closure of two facilities, in North Yorkshire and the West Midlands, while the transfer to China of all production from our facility in Essex has now been completed. Overall, we have reduced headcount by 75, or some 14% of the combined workforce,during the half year. Our UK door hardware (approximately 23% of UK revenue) and composite door(approximately 22% of UK revenue) product lines performed in line with ourexpectations in the half year. We have continued to expand our multipoint doorlock offering, while at the same time reducing UK headcount in our door hardwarebusiness as we transferred more of the production to China. Our composite door product line continues to be underpinned by Governmentspending on the "Better Homes Initiative". New contracts, which are expected tocommence in the second half, have been won and a new door product is beingdeveloped. Operating costs in the business are expected to reduce following therecent closure of one of its three UK sites. US US revenue in the first half of 2006 was approximately £58 million, with organicgrowth of 5% in the period. As expected, US housing starts declined in the firsthalf of this year while repair and remodelling expenditure continued to grow,albeit at a slower rate than in 2005. We continued to expand our US window hardware product line (approximately 50% ofUS revenue), with new product introductions, market share gains and favourabletrends within the overall US window market. These factors also benefited our USseals and PVC extrusions product lines (approximately 30% of US revenue). We are seeing good customer acceptance of our new weatherstripping seal, andwill also be launching a new seal product for the US door market for the firsttime. Our first range of casement window hardware will be launched in the secondhalf, while our growing door hardware product line (approximately 15% of USrevenue) is benefiting from an expanding product range, particularly inmultipoint locks. Development The recent acquisitions in the US of Builders Hardware in September 2005 andBandlock in March 2006, and of Balance UK which we also acquired in March 2006to fill a product gap in our US business, are performing at or ahead ofexpectations. All are demonstrating good organic growth and have margins thatare higher than the Division's average. In Laird Security Systems overall, sourcing from Asia for its hardwarebusinesses has continued to expand as planned. Revenue sourced from Asia grew bysome 50% in the first half of 2006, compared with the same period last year. Outlook Laird Security Systems has continued to provide innovative local solutions toits customers, allied to what are believed to be industry leading servicelevels, on a global basis. With the actions we have taken in response to marketconditions, together with normal seasonal trends, we currently expect to see animproved performance in the Division in the second half of the year. Maintaining Progress The Laird Group has made further good progress in the first half of 2006. LairdTechnologies is benefiting from its presence in growth markets, its broad andcomplementary product range, its technical capabilities and its customerrelationships. Laird Security Systems is benefiting from the cost reductionmeasures which have been undertaken, its new product introductions and marketshare gains. The Group continues to be developed strategically, and is wellpositioned to make further progress in the second half of this year. Nigel Keen Peter HillChairman Chief Executive 1 August 2006 FINANCE DIRECTOR'S REPORT Revenue Revenue was £286.1 million in the first six months against £246.2 million a yearearlier. Of the latter, £14.0 million of revenue was from Permacell Finessewhich was divested in September 2005. Revenue from continuing operationsincreased by 23%. Organic growth from continuing operations was 8%. This is measured by restating2006 revenue at 2005 exchange rates, and then comparing it to revenue in 2005including the revenue for the acquired businesses in the equivalent period notin our ownership. Profit Profit before tax from continuing operations in the six months to 30 June 2006was £28.5 million (2005, £16.1 million). Profit from discontinued operations was£0.2 million (2005, £0.1 million). Underlying profit before tax in the six months to 30 June 2006 was £32.7 million(2005, £24.1 million). Underlying profit is defined as profit before tax,exceptional items, amortisation of acquired intangible assets, the gain or losson disposal of businesses and the impact arising from the fair valuing offinancial instruments. Its derivation is set out in Note 8. Finance Costs Finance costs of £6.4 million, less finance revenue of £0.9 million, were higher than in the first six months of 2005, due to the funding costs of the acquisitions and higher interest rates. These funding costs were offset in part by the Rights Issue in March, the proceeds of which were received in the latter part of April. Taxation The underlying tax charge is equivalent to an average tax rate of 18.0% onunderlying profits before tax and is marginally higher than the 17.4% for thefirst six months of 2005. The Group has a relatively low tax charge in the USAbenefiting from tax deductions for amortised goodwill resulting fromacquisitions. A growing proportion of profits is also from jurisdictions withlow tax rates or with tax incentives. An analysis of the total tax charge isgiven in Note 8. Underlying Earnings Underlying profits were 36% up on the first six months of 2005, but with moreshares in issue, underlying earnings per share were up by 23%. Underlyingearnings are based on underlying profit less underlying tax and exclude deferredtax on acquired intangible assets and goodwill. An analysis of underlyingprofits and earnings is given in Note 8. Cash Flow and Borrowings There was a trading cash inflow of £6.7 million in the period, compared with anoutflow of £0.6 million for the same period last year and an inflow of £33.9million for the full year. The Group is highly cash generative, but the tradingcash flow surpluses tend to be heavily weighted towards the second half of theyear. Analysis of cash flow £mOperating profit 38.1Depreciation/ asset disposal gain 6.0Other non cash 0.5 --------- 44.6Increase in working capital* (19.7)Capital expenditure less disposals (11.8)Finance costs (5.3)Taxation (1.1) --------- Trading cash flow 6.7Dividends (12.8)Net cost of acquisitions and disposals (82.6)Exceptional costs (0.3)Pension contributions above the normal level (0.3)Proceeds from share issues 118.3Movement in treasury shares (0.8)Exchange translation movement 11.2 ---------Decrease in net borrowings 39.4 --------- * after adjusting for accruals on exceptional items of £0.3 million. An increase in trade debtors and inventories has led to the rise in workingcapital due in part to higher levels of activity in June compared to Decemberbut also for debtors, due to a larger proportion of Group revenues beinggenerated in Asia, where payment terms are longer. Cash tax payments were lower than the underlying tax charge due to the receiptof tax repayments in respect of previous years. Net borrowings in the first half of the year decreased by £39.4 million to£108.7 million, compared with £148.1 million at the end of 2005. This was afterreceiving £118.3 million of proceeds from share issues, payment of dividends of £12.8 million on the increased share base following the Rights Issue, and a netspend of £82.6 million on acquisitions and disposals. As much of the Group'sborrowings are in US Dollars and the US Dollar has weakened since the end of2005, £11.2 million of the decrease is due to the translation of borrowingsusing the US Dollar rate at the end of June 2006. Loan Facilities The Group has £195 million of bilateral loan facilities, which were previouslydue to expire in 2010, but have been extended to 2011. The Group also has $190million (£103 million) of US Dollar Private Placement facilities, which expirebetween 2008 and 2016. Pensions The Group had a pension deficit of £11.8 million at June 2006, a reduction of£4.6 million from £16.4 million at the end of December 2005. The main driver ofthis was an increase in the bond rate used to discount liabilities, from 4.75%at December 2005 to 5.25% at June 2006, which reduced liabilities by £7.8million. This was offset in part by an increase in the inflation assumption to2.90% (31 December 2.75%), which increased liabilities by £1.5m, together withlower actual asset returns in the first half of 2006 of £2.6 million comparedwith the assumed return. Jonathan SilverFinance Director 1 August 2006 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 2006 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 to be 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 2006. Ernst & Young LLPLondon 1 August 2006 Group income statement(unaudited) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005Note £m £m £m Continuing operations3 Revenue 286.1 232.2 490.3 -------- -------- --------- Operating profit before amortisation of acquired 38.1 29.1 65.8 intangible assets and exceptional items Amortisation of acquired intangible assets (3.5) (1.8) (4.4)5 Exceptional items - (6.0) (15.5) -------- -------- --------- Operating profit 34.6 21.3 45.9 Finance revenue 0.9 0.4 0.8 Finance costs (6.4) (5.5) (11.2) Financial instruments - fair value adjustment (0.7) (0.1) (1.1) Other finance revenue / (costs) - pension 0.1 - (0.1) -------- -------- --------- Profit before tax from continuing operations 28.5 16.1 34.38 Taxation* (7.1) (3.9) (9.0) -------- -------- --------- Profit for the period from continuing operations 21.4 12.2 25.3 Discontinued operations6 Profit / (loss) for the period from discontinued 0.2 0.1 (5.1) operations -------- -------- --------- Profit for the period 21.6 12.3 20.2 -------- -------- ---------7 Earnings per share Basic from continuing operations 11.8p 7.3p 15.1p Diluted from continuing operations 11.7p 7.2p 15.0p Basic on profit for the period 11.9p 7.4p 12.1p Diluted on profit for the period 11.8p 7.3p 12.0p 3 Total revenue Revenue (from continuing and discontinued operations) 286.1 246.2 508.7 8 Underlying results** Profit before tax 32.7 24.1 55.1 Earnings per share Basic 14.8p 12.0p 27.3p Diluted 14.6p 11.8p 27.0p9 Dividends declared Dividends 6.6 5.2 15.6 Dividend per share 3.35p 3.11p 9.56p * the amount of overseas tax charged during the period was £6.7m (June 2005,£3.9m; December 2005, £9.5m) **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 to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £m Profit for the period 21.6 12.3 20.2 Actuarial gains / (losses) onretirement benefit obligations 4.3 - (7.9)Deferred tax - - (2.0)Exchange differences onretranslation of overseas netinvestments (28.4) 19.2 34.5Exchange differences on netinvestment hedges 9.7 (8.8) (12.8)Tax on exchange differences (0.2) (0.5) 1.8 -------- -------- ---------Total income and expense recogniseddirectly in equity (14.6) 9.9 13.6 -------- -------- ---------Total income and expense recognisedduring the period 7.0 22.2 33.8Restatement for the effects of IAS32 and 39 - (0.4) (0.4) -------- -------- ---------Total income and expense recognisedfor the period 7.0 21.8 33.4 -------- -------- --------- Group balance sheet(unaudited) As at As at As at 30 June 30 June 31 December 2006 2005 2005 £m £m £m AssetsNon-current assetsProperty, plant and equipment 83.8 79.1 81.6Intangible assets 410.6 342.4 364.5Deferred tax assets 0.2 - 0.3Other non-current assets 2.9 1.3 1.3 --------- --------- --------- 497.5 422.8 447.7 --------- --------- ---------Current assetsInventories 66.0 67.6 59.5Trade and other receivables 117.5 103.0 97.0Income tax receivable 0.1 2.4 0.3Cash and cash equivalents 82.0 33.8 23.9 --------- --------- --------- 265.6 206.8 180.7 --------- --------- ---------LiabilitiesCurrent liabilitiesBorrowings (5.7) (7.5) (6.7)Trade and other payables (94.5) (93.4) (95.9)Current tax liabilities (3.4) (3.4) (3.7) --------- --------- --------- (103.6) (104.3) (106.3) --------- --------- ---------Net current assets 162.0 102.5 74.4 --------- --------- ---------Non-current liabilitiesBorrowings (185.0) (184.4) (165.3)Derivative financial instruments (2.1) (0.4) (1.4)Income tax payable (15.6) (14.8) (15.7)Deferred tax liabilities (24.9) (18.3) (23.1)Retirement benefit obligations (11.8) (14.6) (16.4)Other non-current liabilities (5.6) (7.6) (1.4)Provisions (16.0) (10.1) (14.5) --------- --------- --------- (261.0) (250.2) (237.8) --------- --------- ---------Net assets 398.5 275.1 284.3 --------- --------- ---------Capital and reservesEquity share capital 49.5 39.7 40.0Share premium 265.7 153.8 155.5Retained earnings 86.1 84.4 91.5Treasury shares (2.8) (2.8) (2.7) --------- --------- ---------Total shareholders' equity 398.5 275.1 284.3 --------- --------- --------- Group cash flow statement(unaudited) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005Note £m £m £m 11 Cash flows from operating activities Cash generated from operations 24.3 11.0 53.0 Tax paid (1.1) (2.8) (2.2) --------- --------- --------- Net cash flows from operating 23.2 8.2 50.8 activities --------- --------- --------- Cash flow from investing activities Interest received 0.9 0.4 0.8 11 Acquisition of businesses (net of (67.0) (17.8) (35.7) cash acquired) Purchase of property, plant and (12.4) (7.4) (17.1) equipment 11 (Outflow) / inflow from sale of (3.7) (0.7) 6.9 businesses Proceeds from sales of property, 0.6 0.2 - plant and equipment --------- --------- --------- Net cash flows from investing (81.6) (25.3) (45.1) activities --------- --------- --------- Cash flows from financing activities Interest paid (6.2) (5.1) (11.1) Net proceeds from issue of 118.3 1.8 3.5 ordinary share capital Movement in treasury shares (0.8) 0.1 0.1 Proceeds from borrowings 21.4 41.6 16.0 Dividends paid to shareholders (12.8) (9.6) (14.9) --------- --------- --------- Net cash flows from financing 119.9 28.8 (6.4) activities --------- --------- --------- Effects of movements in foreign (1.3) 1.3 1.8 exchange rates --------- --------- --------- 12 Increase in cash and cash 60.2 13.0 1.1(a) equivalents for the period Cash and cash equivalents brought 21.7 20.6 20.6 forward --------- --------- --------- Cash and cash equivalents carried 81.9 33.6 21.7 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 2006 wereauthorised for issue by the Board of Directors on 1 August 2006. 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 2005 and theyear ended 31 December 2005 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 2005 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 3 St. James's Square, London SW1Y 4JU. 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 2006 Annual Report and Accounts which donot differ significantly from those used in the preparation of the 2005 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 2006presentation. 3 Segmental analysis Primary reporting format - business segments Laird Technologies Laird Security Systems Total 12 months 12 months 12 months 6 months 6 months to 31 6 months 6 months to 31 6 months 6 months to 31 to 30 June to 30 June December to 30 June to 30 June December to 30 June to 30 June December 2006 2005 2005 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £m £m £m £mContinuingoperationsRevenue 165.2 118.6 259.4 120.9 113.6 230.9 286.1 232.2 490.3 ------ ------ ------ ------ ------ ------ ------ ------ ------ Segmentresult 24.7 15.5 37.7 13.4 13.6 28.1 38.1 29.1 65.8before:Amortisationof acquiredintangibleassets (3.5) (1.8) (4.4) - - - (3.5) (1.8) (4.4)Exceptionalitems - (2.8) (5.9) - (3.2) (9.6) - (6.0) (15.5) ------ ------ ------ ------ ------ ------ ------ ------ ------ 21.2 10.9 27.4 13.4 10.4 18.5 34.6 21.3 45.9 ------ ------ ------ ------ ------ ------ Finance 1.0 0.4 0.8revenueFinance (7.1) (5.6) (12.4)costs ------ ------ ------Profitbefore 28.5 16.1 34.3taxTaxation (7.1) (3.9) (9.0) ------ ------ ------Profit fortheperiod fromcontinuing 21.4 12.2 25.3operations ------ ------ ------DiscontinuedoperationsRevenue - - - - 14.0 18.4 - 14.0 18.4 ------ ------ ------ ------ ------ ------ ------ ------ ------ Segment - - - - 0.1 (0.2) - 0.1 (0.2)resultLoss ondisposal - - - (0.1) - (7.8) (0.1) - (7.8) ------ ------ ------ ------ ------ ------ ------ ------ ------(Loss) /profitbefore - - - (0.1) 0.1 (8.0) (0.1) 0.1 (8.0)taxTaxation - - - - - 2.9 - - 2.9 ------ ------ ------ ------ ------ ------ ------ ------ ------(Loss) /profit fortheperiod fromdiscontinued - - - (0.1) 0.1 (5.1) (0.1) 0.1 (5.1)operations ------ ------ ------ ------ ------ ------Loss beforetax on priorperioddisposal* (1.8) - -Taxation * 2.1 - - ------ ------ ------ 0.2 0.1 (5.1) ------ ------ ------Profit forthe 21.6 12.3 20.2period ------ ------ ------ * These relate to other business segments disposed of in periods prior to 2005. 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 to 6 months to 12 months to At At At 30 June 30 June 31 December 30 June 30 June 31 December 2006 2005 2005 2006 2005 2005 Euros 1.46 1.46 1.46 1.45 1.46 1.45US 1.79 1.87 1.82 1.85 1.77 1.72dollarsRenminbi 14.39 15.49 14.90 14.79 14.66 13.85 5 Exceptional items 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £mLaird TechnologiesFlood costs, before insuranceproceeds - 2.2 4.5Insurance proceeds - - (1.3)Restructuring costs - 0.6 2.7Laird Security Systems (UK)Plant closure and restructuringcosts - 2.4 4.8Future rental costs for onerouslease - - 4.0Loss on disposal of business - 0.8 0.8 -------- -------- -------- - 6.0 15.5 -------- -------- -------- 6 Discontinued operations 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £mResults from discontinued operations:Revenue - 14.0 18.4 -------- -------- --------Operating profit / (loss) - 0.1 (0.2)Taxation - - - -------- -------- --------Profit / (loss) after tax fromdiscontinued operations - 0.1 (0.2)Profit / (loss) on disposal ofbusinesses:Loss on current period disposals - - (7.6)Loss on prior year disposals (1.9) - (0.2)Taxation 2.1 - 2.9 -------- -------- --------Profit / (loss) after tax ondisposals 0.2 - (4.9) -------- -------- --------Profit / (loss) from discontinuedoperations 0.2 0.1 (5.1) -------- -------- -------- 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 to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £m ProfitProfit after tax from continuingoperations 21.4 12.2 25.3Profit / (loss) from discontinuedoperations 0.2 0.1 (5.1) --------- -------- ---------Profit for the period 21.6 12.3 20.2 --------- -------- --------- Number of Number of Number of shares Shares Shares (restated) (restated) (m) (m) (m) Weighted average sharesBasic weighted average shares 181.0 166.7 167.5Options 2.4 1.8 1.5Contingent shares 0.1 0.4 0.3 --------- -------- ---------Diluted weighted average shares 183.5 168.9 169.3 --------- -------- --------- Pence Pence Pence Earnings per shareBasic from continuing operations 11.8 7.3 15.1 --------- -------- ---------Diluted from continuing operations 11.7 7.2 15.0 --------- -------- ---------Basic on profit for the period 11.9 7.4 12.1 --------- -------- ---------Diluted on profit for the period 11.8 7.3 12.0 --------- -------- --------- Comparative figures for weighted average number of shares and earnings per sharehave been restated after adjusting for the bonus element of the 4 for 17 RightsIssue in March 2006. The adjustment factor is 0.9429 calculated using 464p pershare, being the closing price on 16 March 2006. 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. The tax charge for theperiod is equivalent to 18.0% (2005, 17.4%) of underlying profit. 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £m Profit for the period 21.6 12.3 20.2Loss before tax on sale ofbusinesses 1.9 - 7.8Taxation from discontinuedoperations (2.1) - (2.9)Taxation from continuingoperations 7.1 3.9 9.0Financial instruments - fair valueadjustment 0.7 0.1 1.1Exceptional items - 6.0 15.5Amortisation of acquiredintangible assets 3.5 1.8 4.4 --------- --------- ---------Underlying profit before tax 32.7 24.1 55.1Underlying tax charge (see below) (5.9) (4.2) (9.5) --------- --------- ---------Underlying earnings 26.8 19.9 45.6 --------- --------- --------- Underlying earnings per sharebasic 14.8p 12.0p 27.3p --------- --------- ---------Underlying earnings per sharediluted 14.6p 11.8p 27.0p --------- --------- --------- Comparative figures for earnings per share have been restated after adjustingfor the bonus element of the 4 for 17 Rights Issue in March 2006. The adjustmentfactor is 0.9429 calculated using 464p per share, being the closing price on 16March 2006. The underlying tax charge is calculated as follows: Tax charge from continuing operations (7.1) (3.9) (9.0) --------- --------- ---------Adjustments to calculate underlying tax charge:Taxation on exceptional items - (1.6) (3.6)Deferred tax on acquired goodwill andintangible assets 1.2 1.3 3.1 --------- --------- ---------Underlying tax charge (5.9) (4.2) (9.5) --------- --------- --------- 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 from continuingoperations was £6.7m (2005, £3.9m). 9 Dividends paid and proposed On 1 August 2006 the Board declared an interim dividend of 3.35p per share(2005, 3.11p). The interim dividend will be paid on 3 November 2006 toshareholders registered on 22 September 2006. Dividends are recorded in thefinancial statements in the period in which they are declared, and approved asshown in the table below: Dividends paid Dividends declared 6 months to 6 months to 12 months to 6 months to 6 months to 12 months to 30 June 30 June 31 December 30 June 30 June 31 December 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £m Final - 9.6 9.6 - - -2004Interim - - 5.3 - 5.2 5.32005Final 12.8 - - - - 10.32005Interim - - - 6.6 - -2006 ------- ------- -------- -------- ------- ------- 12.8 9.6 14.9 6.6 5.2 15.6 ------- ------- -------- -------- ------- ------- Increases in dividends paid compared to dividends declared are due to highernumbers of shares being in issue at the date of payment. Dividends paid Dividends declared 6 months to 6 months to 12 months to 6 months to 6 months to 12 months to 30 June 30 June 31 December 30 June 30 June 31 December 2006 2005 2005 2006 2005 2005 Pence Pence Pence Pence Pence PenceFinal - 5.7 5.7 - - -2004Interim - - 3.11 - 3.11 3.112005Final 6.45 - - - - 6.452005Interim - - - 3.35 - -2006 ------- ------- ------- ------- ------- ------- 6.45 5.7 8.81 3.35 3.11 9.56 ------- ------- ------- ------- ------- ------- Comparative figures for dividends per share have been restated after adjustingfor the bonus element of the 4 for 17 Rights Issue in March 2006. The adjustmentfactor is 0.9429 calculated using 464p per share, being the closing price on 16March 2006. 10 Reconciliation of movements in equity 6 months to months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £m Opening balance for the period 284.3 260.2 260.2Adjustment for implementation of IAS32/39 - (0.4) (0.4) -------- -------- ----------Opening balance for the period asadjusted 284.3 259.8 259.8Total recognised income and expensefor the period 7.0 22.2 33.8Rights Issue of shares 117.5 - -Exercise of share options 0.8 1.8 3.5Issue of shares on acquisition ofbusinesses 1.5 - 0.3Share based payments 1.0 0.8 1.6Treasury shares (0.8) 0.1 0.2Dividends paid (12.8) (9.6) (14.9) -------- -------- ----------Total shareholders' equity 398.5 275.1 284.3 -------- -------- ---------- 11 Additional cash flow information Cash generation from operations Continuing operations 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £m Net profit after taxation 21.4 12.2 25.3Depreciation and other non-cash itemsDepreciation 6.6 5.9 12.0Amortisation of capitaliseddevelopment costs 0.5 - 0.2Exceptional fixed asset write-downs - 1.4 2.0Exceptional inventory write-downs - 1.4 2.1Exceptional loss on disposal ofbusiness - 0.8 0.7Profit on disposal of fixed assets (0.6) - -Capitalised development costs (1.0) (0.8) (2.6)Share based payments 1.0 0.8 1.6Amortisation of acquired intangibleassets 3.5 1.8 4.4Financial instruments - fair valueadjustment 0.7 0.1 1.1Pension charges 0.9 0.6 1.3Other net finance costs 5.4 5.1 10.4Taxation 7.1 3.9 9.0Pension contributions (1.2) (0.7) (7.6)Changes in working capitalInventories (7.6) (7.3) (0.3)Trade and other receivables (13.0) (12.4) (9.3)Trade, other payables andprovisions 0.6 (1.1) 5.5 --------- --------- ---------Cash generated from continuingoperations 24.3 11.7 55.8 --------- --------- --------- Discontinued operations Net profit / (loss) aftertaxation 0.2 0.1 (5.1)Taxation (2.1) - (2.9)Loss on disposal of businessesbefore taxation 1.9 - 7.8Depreciation - 0.6 0.8Changes in working capital - (1.4) (3.4) --------- --------- ---------Cash flow from discontinuedoperations - (0.7) (2.8) --------- --------- ---------Cash generated from operations 24.3 11.0 53.0 --------- --------- --------- Working capital movements are after cash outflows of £0.3m (2005, £3.1m) inrespect of exceptional costs of redundancy and restructuring and the flood atLaird Technologies charged in prior years. 11 Additional cash flow information (continued) Net cash outflow on acquisitions and disposals 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £mAcquisition of businesses Consideration:Cash consideration (61.7) (16.8) (34.1)Net cash acquired 0.2 4.1 4.9 --------- --------- --------- (61.5) (12.7) (29.2)Deferred consideration paid (5.5) (5.1) (6.5) --------- --------- ---------Net cash outflow on acquisition ofbusinesses (67.0) (17.8) (35.7) --------- --------- ---------Borrowings acquired (11.9) (0.4) (0.3) --------- --------- --------- Disposal of businesses Consideration:Net cash consideration (3.7) (0.7) 6.9Net cash disposed of - - - --------- --------- ---------Net cash (outflow) / inflow ondisposal of businesses (3.7) (0.7) 6.9 --------- --------- --------- 12 Borrowings (a) Reconciliation of net borrowings At At At 30 June 30 June 31 December 2006 2005 2005 £m £m £m Increase in cash and cash equivalents (netof bank overdrafts) during the period 60.2 13.0 1.1Movement in borrowings (21.4) (41.6) (16.0)Borrowings of businesses acquired (11.9) (0.4) (0.3)Differences on exchange on borrowings 12.5 (10.5) (14.3) ------ ------ --------Movement in net borrowings during the period 39.4 (39.5) (29.5)Net borrowings brought forward (148.1) (118.6) (118.6) ------ ------ --------Net borrowings carried forward (108.7) (158.1) (148.1) ------ ------ --------Cash and cash equivalents (net of bankoverdrafts) 81.9 33.6 21.7Other current borrowings (5.6) (7.3) (4.5)Non-current borrowings (185.0) (184.4) (165.3) ------ ------ --------Net borrowings carried forward (108.7) (158.1) (148.1) ------ ------ -------- Cash and cash equivalents in the balance sheet comprise cash at bank and in handand short-term deposits with an original maturity in three months or less. Forthe purpose of the consolidated cash flow statement, cash and cash equivalentsconsist of cash and cash equivalents as defined above, net of outstanding bankoverdrafts. (b) Committed borrowing facilities The Group had total committed loan facilities of £309.1m at 30 June 2006 (2005,£275.4m), of which £290.9m (2005, £272.3m) was available for more than threeyears and £188.8m was drawn at 30 June 2006 (30 June 2005, £186.8m). Committedfacilities include £11.4m (30 June 2005, £Nil) 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 2006, 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 4.4% per annum (December 2005, 4.4%) andthose for equities at 7.8% per annum (December 2005, 7.8%). The mortality assumption used at 30 June is the same as that used at 31 December2005. This is based on 92 series tables with a medium cohort allowance forfuture mortality improvements to 2015 for pensioners and 2025 fornon-pensioners. For IAS 19 the schemes' liabilities have been calculated under the projectedunit method and the main financial assumptions were inflation of 2.90% per annum(December 2005, 2.75%), salary increases of 3.9% per annum (December 2005,3.75%) and a discount rate for liabilities of 5.25% per annum (December 2005,4.75%). The main impact of these changes, and the actual versus expected assetperformance for the period, can be seen below. 6 months to 6 months to 12 months to 30 June 30 June 31 December 2006 2005 2005 £m £m £m Actual return less expected returnon pension scheme assets (2.6) - 4.5Experience gain on Plan liabilities 0.6 - 1.9Gain / (loss) on change ofassumptions 6.3 - (14.3) --------- --------- ---------Total actuarial gain / (loss)recognised in SORIE 4.3 - (7.9) --------- --------- --------- The impact of these changes, coupled with the excess of contributions over theexpense recognised for the period in the income statement of £0.3m, has been toreduce the deficit from £16.4m at 31 December 2005 to £11.8m at 30 June 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Laird