13th Sep 2005 07:02
Laird Group PLC13 September 2005 13 September 2005 The Laird Group PLC Interim Results for the Six Months to 30 June 2005 6 months to 30 June 2005 2004 £m £mRevenue:- Continuing operations 246.2 164.6 +50%- Discontinued operations - 60.9 -------- -------- 246.2 225.5 +9%Profit before tax 16.2 19.0Underlying profit before tax* 24.1 21.0 +15%Net borrowings 158.1 85.3Shareholders' funds 275.3 206.6 p/share p/shareUnderlying earnings* 12.7 12.2 +4%+Dividends 3.3 3.15 +5% * before exceptional items, amortisation of acquired intangible assets, deferred tax on acquired intangible assets and goodwill, and the impact arising from the fair valuing of financial instruments + average number of shares in issue 157.2 million in the first half of 2005 and 142.1 million in the first half of 2004 Highlights: - Strength and growth from strategic focus - Strong growth in revenue and underlying profit - Centurion acquisition performing ahead of expectations - Continuing expansion in Asia Laird's Chief Executive, Peter Hill, commenting on the results, said:- "Laird has made further good progress during the first half of 2005, maintainingthe momentum established in recent years. Underlying profit before tax increasedby 15% to £24.1 million. The strategic focus of the Group onto our twomarket-leading divisions, Laird Technologies and Laird Security Systems, wasfurther complemented by the strengthening and development of those two divisionsthrough investment and value-adding acquisitions. With the strategy we have inplace, the strength of our businesses and the actions we continue to take weexpect to make further progress in the second half of this year." For enquiries: The Laird Group PLC The Maitland Consultancy Peter Hill, Chief Executive Brian Hudspith Jonathan Silver, Finance Director Charlotte Barker Tel: 020 7468 4040 Tel: 020 7379 5151 REVIEW OF THE HALF YEAR Benefits of Strategic Focus Laird has made further good progress during the first half of 2005, sustainingthe momentum established in recent years. The strategic focus of the Group ontoour two market-leading divisions, Laird Technologies and Laird Security Systems,was further complemented by the strengthening and development of those twodivisions through investment and value-adding acquisitions. As a result we haveagain delivered positive organic turnover growth together with good growth inunderlying profits and earnings. Our businesses are moving ahead stronglythrough an increasing range of superior products, market-leading positions,enhanced capabilities and close customer relationships, all underpinned by anefficient and expanding manufacturing base in Asia and Central Europe. Thiscombination brings strength to the Group as well as providing an attractivegrowth profile. Delivery of Profitable Growth Group results for the first half of 2005, and comparative periods, have beenreported in accordance with International Financial Reporting Standards (IFRS).The effect of the implementation of IFRS on the Group's 2004 results wascommunicated to shareholders on 23 June 2005 by way of a Stock Exchangeannouncement. The full text of the announcement is available atwww.laird-plc.com. Revenue in the six months to 30 June 2005 was £246.2 million. This is 9% up onthe £225.5 million of total revenue in the same period last year, which includedturnover of £60.9 million from Laird Plastics, divested in October 2004. Growthin revenue from continuing operations was 50%. Underlying organic revenue growthfrom continuing operations was 7%. Underlying profit before tax, i.e. before exceptional items, amortisation ofacquired intangibles and the fair valuing of financial instruments, was£24.1 million in the six months to 30 June 2005, 15% up on the £21.0 million inthe first half of 2004. This strong growth was achieved despite the impact ofhigher commodity prices and the effects of the flood in April 2005 at ourfacility in Pennsylvania, USA. The Group's underlying operating profit margin increased to 11.9%, from 10.2% inthe first half of 2004 as a result of the portfolio repositioning, including thedivestment of Laird Plastics, which was successfully undertaken as well as thedevelopment of its continuing businesses. Profit on ordinary activities beforetaxation, but after exceptional items, the amortisation of acquired intangiblesand the fair valuing of financial instruments, in the first half of 2005 was£16.2 million compared with £19.0 million last year. Underlying earnings per share in the first half of 2005 were 12.7 pence, 4% upon the 12.2 pence in the first half of 2004. Exceptional costs of £6.0 million were incurred in the period (2004: £nil). Thisis largely as a result of the restructuring of Laird Technologies' Swedishantennae operations and their relocation to Central Europe, of Laird SecuritySystems' UK window hardware business and the resultant relocation to China, allas expected, together with the effects of the Pennsylvania flood. Net borrowings at 30 June 2005 were £158.1 million, 57% of shareholders' funds.Interest cover in the half year was 5.7 times. There was a trading cash outflowin the half year of £0.5 million, compared with an inflow of £3.0 million in thefirst half of 2004, with an increase in working capital requirements as a resultof the higher turnover. There was a cash outflow on acquisitions and disposalsin the half year of £18.9 million compared with £20.3 million in the first halfof 2004, and a cash spend on exceptional items of £3.1 million compared with£2.3 million in the first half of 2004. The Board has declared an interim dividend of 3.3 pence, 5% higher than the3.15 pence at 30 June 2004. Laird Technologies Six months to 2005 2004 Growth30 June £m £m Revenue 118.6 54.8 116%Underlying operating profit* 15.5 8.1 91% *before exceptional items and amortisation of acquired intangibles Laird Technologies saw a doubling in revenue and operating profit compared tothe first half of 2004. This was due to the acquisition of Centurion WirelessTechnologies, the global leader in the design and supply of cellular handsetantennae which was acquired in October 2004, and Cateron, the leading supplierof EMI shielding products to the global notebook computer market acquired inJanuary 2005, together with another period of strong organic growth. Laird Technologies' revenue in the six months to 30 June 2005 was£118.6 million, 116% up compared to the first half of 2004. Underlying organicrevenue growth was 14%. The benefits of acquisitions, the strong organic revenuegrowth and the increased levels of production from lower cost countries combinedto drive underlying operating profit to £15.5 million in the six months to30 June 2005, up 91% compared to the first half of 2004. The key markets of cellular telephone handsets, information technology andtelecommunications hardware all remained buoyant, as did demand for our productsfrom the military, consumer, industrial and transportation markets. Particularlystrong was the demand for both our EMI shielding and antennae products for thecellular handset market, which together represented some 55% of LairdTechnologies' revenue in the period. The integration of Centurion Wireless Technologies has progressed well and weare on track to achieve the annual cost synergies of $5 million a year by 2006,announced at the time of its acquisition. We increased antennae revenuessignificantly in the period as a result of stronger than expected market demand,new programme wins and market share gains. Revenue from Centurion's products inthe first half of 2005 increased by 23% compared with the $81 million in thefirst half of 2004, to almost $100 million. This includes antennae revenues,accounting for approximately three quarters of Centurion's total revenue in thefirst half of 2004, which grew by nearly 50% in the first half of 2005. Sales oflower margin power products, accounting for approximately one quarter ofCenturion's turnover in the first half of 2004, decreased as expected by almost45% as programmes became end-of-life and were not replaced. Cellular antennaeunit sales grew strongly in the period to almost 80 million, more than 30%higher than in the first half of 2004, as a result of both strong market demandand market share gains. Average selling prices also increased year-on-year dueto a changing sales mix, with a growing proportion of modular antennae sold.Land mobile radio, WiFi and Telematics antennae shipments also showed goodgrowth. The integration of Cateron is also well on track, allowing us to provide a fullservice design and supply offering to Taiwanese Original Design Manufacturers.Under our management, Cateron's own revenues in the period have increased by 28%compared to the first half of 2004. We have amalgamated the separate LairdTechnologies and Centurion facilities in Korea, and the Laird Technologies,Centurion and Cateron facilities in Taiwan, and the respective global salesforces have been integrated. The first "synergy" sales, involving thecross-selling of EMI shielding, antennae and thermal products to customers, areevident and we have started the development of integrated EMI shielding andthermal management products. Demand for Laird Technologies' EMI shielding products again grew in the period,particularly board level shield and combination shielding products in thecellular handset market. EMI sales in the period were approximately$115 million, up some 10% compared with the first half of 2004. Significantdamage was inflicted on the Laird Technologies EMI shielding facility inPennsylvania in April, when the Delaware River flooded and breached theprotective levee. Production at the facility was completely suspended forseveral days before operations and customer service were restored. It isestimated that the effects of the flood reduced Laird Technologies' underlyingoperating profits in the first half by some £1.5 million. Flood recovery wassubstantially complete by the end of June and order intake has largely returnedto pre-flood levels. Approximately 20% of pre-flood production has beentransferred permanently to other Laird Technologies plants. Laird Technologies' small thermal products segment achieved sales ofapproximately $10 million in the first half of 2005. Following this period ofconsolidation, an increasing emphasis on direct sales, additional investment innew product development and the start-up of selected product manufacturing inAsia are all expected to contribute to future growth in this area. Laird Technologies again grew its Asian business. In the first half of 2005approximately half of its total sales were manufactured in the region, withapproximately one-third in North America and the remainder in Europe. Wecontinue to expand our production capacity in China. A new 35,000 square metrefacility is currently under construction in Shenzhen to replace our existingthree buildings there; this is due for completion by the end of this year. Wehave also secured a new site on the Nokia "campus" in Beijing, whereconstruction will shortly commence on a new 23,000 square metre facility. Thisis scheduled for completion in the first half of 2006, and will replace ourexisting facility nearby. Our operations in Tianjin and Shanghai have also beenexpanded. At the end of June Laird Technologies had some 4,300 employees inAsia, approximately 3,500 being in China. In Europe, we have now consolidated the vast majority of our EMI shieldingproduction into our facility at Liberec in the Czech Republic, which was openedin 2004. All product lines are now operational. In the UK, the two smallfacilities acquired with Warth at the end of 2003 are being consolidated ontoone site, and part of the manufacturing transferred to Liberec. In the firsthalf of this year, we opened a new facility at Szombathely in Hungary to provideextremely short lead times and reduced logistics costs for the supply ofcellular antennae to Nokia. This facility will progressively replace all of ourEuropean antennae manufacturing currently located in Sweden. Laird Technologies continues to expand its product offering and increasemanufacturing capacity close to the locations of our major customers in low costcountries. We will continue to strengthen and develop the business both throughinvestment for organic growth and through value-adding acquisitions. We willfurther add complementary products that could be offered to existing and newcustomers within the electronics industry, and extend our geographic expansion.Improvements in product performance and functionality, including opportunitiesto combine functionalities within our existing products, will actively bedeveloped. We believe that these actions, together with our ongoing emphasis on customerservice and low cost manufacturing, provide a sound basis for the continuedprofitable growth and development of Laird Technologies. Laird Security Systems Six months to 2005 2004 Growth30 June £m £m Revenue 127.6 109.8 16%Underlying operating profit* 13.7 13.1 5% *before exceptional items and amortisation of acquired intangibles Laird Security Systems has again advanced, delivering record half year profitsdespite the severe downturn in the UK window and conservatory markets and theimpact of higher commodity prices. Revenue in the six months to 30 June 2005 was £127.6 million, up 16% on thefirst half of 2004. Acquisitions, which were in the UK in 2004, addedapproximately £20 million of revenue compared with the previous year. Revenuefrom existing UK operations in the first half was down by approximately£7 million, or 10%, as a result of the weak window market. Revenue from our USoperations again grew strongly in the period, by almost £7 million or 18%, as aresult of continuing benign market conditions, new product introductions andmarket share gains. Of the division's total first half 2005 revenue,approximately 65% was in the UK and 35% in the US. Underlying operating profit in the six months to 30 June 2005 was £13.7 million,up 5% on the £13.1 million in the first half of 2004. It is estimated that thenet effects of higher commodity prices reduced operating profits in the divisionby some £0.7 million in the first half of 2005 compared with the correspondingperiod last year. Our composite door business in the UK again made good progress. The acquisitionof Securidor in May this year has brought much needed additional capacity,product range expansion and key local authority relationships. We are now firmlyestablished as the leader in this sector. Our UK window hardware businesses have, as described above, suffered fromreduced demand in an already mature market as a result of rising interest rates,a marked reduction in consumer confidence, and intense competition. We beganduring the half year to transfer the majority of production to China from whatwas our largest UK facility, in Essex; this will be completed by year end. Laird Lifestyle Products, our UK conservatory and window business which wepurchased from the Receiver in September last year and which was loss-making,has benefited, despite the downturn in the retail market, from our intense driveto improve manufacturing efficiencies and service levels and to reduce costs.Under our management the business has been restructured significantly, withgreater emphasis placed on product development, and new accounts are nowstarting to be won. With its affordable nature and low penetration we expectthis segment of the conservatory market to return to growth, albeit probably notuntil next year. In the meantime we are focused on building on our leadingposition with the major retailers and growing our market share. Employee numbersat Laird Lifestyle and our UK window hardware business have been reduced by some175 since the beginning of this year; 20% of the combined workforce. We expectto see the progressive benefits of these cost reductions as the year progresses. Our UK uPVC business suffered from weaker demand and the effects of higher resinraw materials prices. Growth continued in our US uPVC and weatherseals business,largely as a result of its superior products which enjoy patent protection. Ourdoor hardware businesses have remained buoyant, particularly in the US as aresult of providing door hardware products to our traditional window customers;we benefit in particular from our multi-point lock products. Our US window hardware business produced another excellent result. This derivedfrom our ability to contribute to the development of new window ranges at ourmajor customers, through our design capabilities and broad range of products weoffer. A number of new window products have been launched by our major customersincorporating a full range of Laird Security Systems products. We also continueto benefit from trends within the US window market towards both hung and uPVCwindows, where we have particular strengths. Additionally, we continue to gainmarket share due to the combination of our design capabilities, ourindustry-leading service levels and consolidation of the US window fabricationindustry by our major customers. Our expansion in China hardware sourcing continued during the period, both fromour own facilities in Ningbo where we have recently occupied our third buildingand also from our partner suppliers there. We see ongoing benefits from ourclose relationship with these suppliers, providing them with engineeringexpertise, specialised investment and quality control. Commodity prices overall remain volatile, although we expect conditions inrespect of both steel and resin to be more favourable in the second half of thisyear than in the first. We continue to use our global scale and diverse supplybase to ensure we remain highly competitive. In September this year we continued the progressive repositioning of LairdSecurity Systems away from the declining UK window market and towards the highergrowth US market. We successfully divested our UK uPVC window systems extrusionbusiness, Permacell Finesse, at the same time acquiring Builders Hardware Inc.in California, USA. Builders Hardware supplements our existing US door andwindow hardware product range and also increases our presence in the importantUS west coast market. Laird Security Systems continues to benefit from the broad range of products itsupplies, the markets it serves, its design capabilities, high levels ofcustomer service, and in particular from its exceptionally high quality USbusiness developed over a number of years. This is underpinned by our wellestablished, yet still expanding, low cost manufacturing base in China. We arereducing our exposure to the mature UK window market and we continue to expandour products, capabilities and geographic presence in North America. All ofthese factors are expected to support the profitable growth of our SecuritySystems business. Maintaining the Momentum Laird has made good progress during the first half of 2005, set against abackdrop of higher interest rates and commodity prices. Our refocusing of theGroup to our two high quality divisions, both with attractive growth profilesand operating across a range of specialist sectors where they generally holdproduct and market leading positions, allows the Group to move forward withpositive momentum and deliver profitable growth. With the strategy we have inplace, the strength of our businesses and the actions we continue to take, weexpect to make further progress in the second half of this year. Nigel Keen Peter HillChairman Chief Executive12 September 2005 FINANCE DIRECTOR'S REPORT International Financial Reporting Standards (IFRS) These interim results have been reported using the IFRS accounting policies weanticipate adopting for the full year. These policies were included in theGroup's IFRS conversion pack which was published on the Group's websitewww.laird-plc.com on 23 June 2005. Revenue Revenue was £246.2 million in the first six months against £225.5 million a yearearlier. Of the latter, £60.9 million of revenue was from Laird Plastics, whichwas divested in October 2004. Revenue from continuing operations increased by50%. Organic growth from continuing operations was 7% and is measured by restating2005 revenue at 2004 exchange rates and comparing it to revenue in 2004 afterincluding revenue in 2004 for the acquired businesses in the equivalent periodnot in our ownership. Laird Lifestyle Products revenue is excluded from thecalculation as it was purchased from the Receiver in September 2004 and wassubsequently restructured significantly with a number of product lines beingdiscontinued. Profit before tax Profit on ordinary activities before taxation, from continuing operations, was£16.2 million (2004, £19.0 million). Profit before taxation from discontinuedoperations was £nil (2004, £1.9 million). Underlying profit before tax in the six months to 30 June 2005 was £24.1 million(2004, £21.0 million). Underlying profit is defined as profit before tax,exceptional items, amortisation of acquired intangible assets and the impactarising from the fair valuing of financial instruments as set out in Note 6. In this year of transition to IFRS, we have stated what the underlying resultswould have been had we still reported under UK GAAP and this is disclosed inNote 7. Under our IFRS accounting policies, certain development costs (£0.8million) have been capitalised and these are partly offset by a charge (£0.4million) made for share based payments. The net impact is that underlyingprofits in the first six months on an IFRS basis are £0.4 million higher thanthey would have been under UK GAAP. Finance Costs Finance costs, which include an interest cost of £5.1 million, were highercompared to the £2.1 million in the first six months of 2004 due to the fundingcosts of the acquisitions and higher interest rates. Taxation The underlying tax charge is equivalent to an average tax rate of 17.5% onunderlying profits before tax and is marginally higher than the 17.1% for thefirst six months of 2004 (Note 8). The Group has a relatively low tax charge inthe USA benefiting from tax deductions for amortised goodwill resulting fromacquisitions in past years. A growing proportion of profits are also fromjurisdictions with low tax rates or with tax incentives. An analysis of thetotal tax charge is given in Note 8. Underlying Earnings Underlying profits were 15% up on the first six months of 2004 and with moreshares in issue, underlying earnings were up by 4% (Notes 5 and 6). Underlyingearnings are based on underlying profit less underlying tax (Note 6) and excludedeferred tax on acquired intangible assets and goodwill. Net Borrowings and Debt Facilities Net borrowings at 30 June 2005 increased by £39.5 million, compared to 31December 2004, to £158.1 million. As much of the Group's borrowings are in USDollars and the US Dollar has strengthened since the end of 2004, £9.2 millionof the increase is due to the translation of borrowings using the US Dollar rateat the end of June 2005. In August 2005, the Group replaced £165 million of bilateral loan facilitieswhich were due to expire in 2008 with new committed facilities of £195 millionwhich will expire in 2010. These new facilities, together with the US DollarGroup's Private Placement facilities which generally expire between 2008 and2016, provide the Group with committed facilities totalling £305 million. Pensions The Group had a pension deficit of £14.8 million at the end of 2004 (£12.9million net of deferred tax). A review of the position at the half year, takingaccount of appropriate changes in actuarial assumptions and their effect onliabilities, and after also taking into account the growth in pension assets,showed no material movement in the pension deficit. A valuation will be carriedout at the year end. Jonathan SilverFinance Director12 September 2005 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 2005 which comprises the Group profit and lossaccount, Group cash flow statement, Group balance sheet, Statement of recognisedincome and expense and Statement of changes in shareholders' equity and therelated Notes 1 to 13. We have read the other information contained in theInterim Report and considered whether it contains any apparent misstatements ormaterial 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. As disclosed in Note 1, the next annual financial statements of the Group willbe prepared in accordance with those International Financial Reporting Standards(IFRSs) adopted for use by the European Union (EU). The accounting policies areconsistent with those that the directors intend to use in the next annualfinancial statements. There is, however, a possibility that the directors may determine that somechanges to these policies are necessary when preparing the full annual financialstatements for the first time in accordance with those IFRSs adopted for use bythe EU. This is because, as disclosed in Note 1, the directors have anticipatedthat revised IAS 19, Employee Benefits, which has yet to be formally adopted foruse in the EU will be so adopted in time to be applicable to the next annualfinancial statements. 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 have been applied. A review excludes audit proceduressuch as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an audit opinionon 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 2005. Ernst & Young LLPLondon12 September 2005 Group profit and loss account (unaudited) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 note £m £m £m Revenue from continuingoperations 3 246.2 164.6 376.1 --------- --------- ---------Operating profit fromcontinuingoperations before amortisationof acquired intangible assets and 3 29.2 21.2 48.8exceptional itemsAmortisation of acquiredintangible assets (1.8) (0.1) (1.2)Exceptional items 4 (6.0) - - --------- --------- --------- Operating profit fromcontinuingoperations on ordinaryactivities before finance costs 21.4 21.1 47.6and taxationFinancial instruments - fairvalue adjustment (0.1) - -Other finance costs (5.1) (2.1) (5.6) --------- --------- --------- Profit on ordinary activitiesbefore taxation 16.2 19.0 42.0Taxation 8 (3.9) (5.0) (10.6) --------- --------- --------- Profit on ordinary activitiesafter taxation 12.3 14.0 31.4 Discontinued operationsProfit for the period fromdiscontinued operations 3 - 1.4 5.8 --------- --------- --------- Profit for the periodattributable to equityshareholders 3 12.3 15.4 37.2 --------- --------- --------- Earnings per share 5Basic 7.8p 10.8p 25.6pDiluted 7.7p 10.7p 25.2p RevenueTotal (including discontinuedoperations) 3 246.2 225.5 468.0 Underlying results*Profit before taxation 6 24.1 21.0 46.4Earnings per share 6 12.7p 12.2p 26.3p Dividends declared 9Dividends 5.2 4.0 14.5Dividends per share 3.3p 3.15p 9.2p *before exceptional items, amortisation of acquired intangible assets, deferredtax on acquired intangible assets and goodwill, and the impact arising from thefair valuing of financial instruments. Group cash flow statement (unaudited) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 Notes £m £m £mCash flows from operatingactivitiesCash generated from operations 10 11.1 11.5 46.7Net interest paid (4.7) (2.2) (5.0)Tax paid (2.8) (0.4) (4.4) --------- -------- ---------Net cash flows from operatingactivities 3.6 8.9 37.3 ---------- -------- --------- Cash flows from investingactivitiesAcquisition of businesses (netof cash acquired) (17.8) (19.9) (90.9)Purchase of property, plant andequipment (7.4) (8.6) (17.9)(Outflow) / inflow from sale ofbusinesses (0.7) (0.4) 32.5Proceeds from sales of property,plant and equipment 0.2 0.4 2.3 --------- --------- ---------Net cash flows from investingactivities (25.7) (28.5) (74.0) --------- --------- --------- Cash flows from financingactivitiesNet proceeds from issue ofordinary share capital 1.8 - 1.5Proceeds from borrowings 11(a) 41.6 12.7 34.0Decrease of short-term deposits - 14.9 14.9Dividends paid to shareholders (9.6) (8.0) (13.0) --------- --------- ---------Net cash flows from financingactivities 33.8 19.6 37.4 Effects of movements in foreignexchange rates on cash and cashequivalents 1.3 (0.2) (0.4) --------- --------- --------- Increase/(decrease) in cash andcash equivalents for the period 13.0 (0.2) 0.3 Cash and cash equivalentsbrought forward 20.6 20.3 20.3 --------- --------- ---------Cash and cash equivalentscarried forward 33.6 20.1 20.6 --------- --------- --------- Group balance sheet (unaudited) As at As at As at 30 June 30 June 31 December 2005 2004 2004Assets Note £m £m £mNon-current assetsIntangible assets 342.4 196.3 313.4Property, plant and equipment 79.1 65.4 75.6 --------- --------- --------- 421.5 261.7 389.0 --------- --------- ---------Current assetsInventories 67.6 56.0 57.4Trade and other receivables 106.7 85.8 85.0Cash and cash equivalents 33.6 20.1 20.6 --------- --------- --------- 207.9 161.9 163.0 --------- --------- ---------LiabilitiesCurrent liabilitiesBorrowings 11(a) (7.3) (7.6) (4.9)Derivative financial instruments (0.4) - -Trade and other payables (93.4) (75.2) (89.1)Current tax liabilities (3.4) (7.1) (2.9) --------- --------- --------- (104.5) (89.9) (96.9) --------- --------- ---------Net current assets 103.4 72.0 66.1 --------- --------- ---------Non-current liabilitiesBorrowings 11(a) (184.4) (97.8) (134.3)Deferred tax liabilities (18.1) (3.9) (15.5)Retirement benefit obligations (14.6) (9.6) (14.8)Other non-current liabilities (22.4) (11.6) (20.7)Provisions 12 (10.1) (4.2) (9.4) --------- --------- --------- (249.6) (127.1) (194.7) --------- --------- ---------Net assets 275.3 206.6 260.4 --------- --------- --------- Shareholders' equityOrdinary share capital 39.7 35.8 39.5Share premium 153.8 106.6 152.2Revaluation reserve 1.7 2.4 1.7Retained earnings 82.9 64.7 69.9Investment in own shares (2.8) (2.9) (2.9) --------- --------- ---------Total shareholders' equity 275.3 206.6 260.4 --------- --------- --------- Statement of recognised income and expense (unaudited) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Profit attributable to equityshareholders 12.3 15.4 37.2 Actuarial losses on retirementbenefit obligations - - (6.1)Deferred tax on actuarial losses onretirement benefit obligations - - 0.9Deferred tax on share basedpayments - 0.2 0.2Deferred tax on propertyrevaluation surplus - - 0.2Exchange differences onretranslation of overseas netinvestments 19.3 (4.4) (18.4)Exchange differences on loans (8.8) 1.4 6.3Tax on exchange differences (0.5) (0.3) 1.4 --------- --------- ---------Total income and expense recogniseddirectly in equity 10.0 (3.1) (15.5) --------- --------- ---------Total income and expense recognisedfor the period 22.3 12.3 21.7 --------- --------- --------- Statement of changes in shareholders' equity (unaudited) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Opening balance for the period 260.4 201.6 201.6Adjustment for implementation ofIFRS 32/39 (0.4) - - --------- --------- ---------Opening balance for the period asadjusted 260.0 201.6 201.6Total recognised income and expensefor the period 22.3 12.3 21.7Share based payments 0.8 0.7 0.8Dividends (9.6) (8.0) (13.0)Issue of shares 1.8 - 49.3 --------- --------- ---------Total shareholders' equity 275.3 206.6 260.4 --------- --------- --------- Notes to the Interim Report (unaudited) 1 Accounting polices Basis of preparation The interim financial information has been prepared in accordance with theaccounting polices set out in the Company's press release addressing thetransition to IFRS, dated 23 June 2005. The press release is available on themedia section of the Company's website, www.laird-plc.com. The figures for the period to 30 June 2004 and year to 31 December 2004 havebeen extracted from the published accounts, and adjusted to take account of anyIFRS impact. It is possible that changes may be required to the financial informationcontained in this Interim Report when it appears for comparative purposes infuture financial statements, as not all IFRS statements have been formallyendorsed by the EU, including the revised IAS 19 Employee Benefits, and furtherinterpretative guidance on the standards may be issued. The Group adopted IAS 32 and IAS 39 with effect from 1 January 2005 and detailsof the impact of that transition can be found in the Statement of changes inshareholders' equity on page 14. The comparative financial information for the year ended 31 December 2004 hasbeen extracted from the annual financial statements of The Laird Group PLC andis re-stated in accordance with the adopted IFRS. The consolidated interimfinancial information does not constitute statutory accounts within the meaningof Section 240 of the Companies Act 1985. These interim results are unauditedbut have been reviewed by our auditors. The statutory accounts for the yearended 31 December 2004, which are prepared under UK GAAP, have been reported onby the Group's auditors and delivered to the registrar of companies. The reportof the auditors was unqualified and did not contain the statements under section237(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 Exchange rates The results and cash flows of overseas subsidiaries are translated into Sterlingusing weighted average rates of exchange for the period. The principal rateswere as follows: 6 months to 6 months to 12 months to 30 June 30 June 31 DecemberAverage 2005 2004 2004Euros 1.46 1.49 1.48US dollars 1.87 1.82 1.83ClosingEuros 1.48 1.49 1.41US dollars 1.77 1.83 1.92 3 Segmental analysis Continuing operations Revenue Operating profit 6 months 6 months 12 months 6 months 6 months 12 months to to to 31 to to to 31 30 June 30 June December 30 June 30 June December 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £mBy activity:Before amortisation ofacquired intangible assets and exceptional items:LairdTechnologies 118.6 54.8 142.8 15.5 8.1 20.7Laird SecuritySystems 127.6 109.8 233.3 13.7 13.1 28.1 ------- ------- ------- ------- ------- ------- 246.2 164.6 376.1 29.2 21.2 48.8 ------- ------- ------- Amortisation of acquired intangible assets (1.8) (0.1) (1.2) Exceptional items (6.0) - -Financial instruments - fair value adjustment (0.1) - -Other finance costs (5.1) (2.1) (5.6)Taxation (3.9) (5.0) (10.6) ------- ------- -------Profit for the period from ordinary activities 12.3 14.0 31.4 ------- ------- ------- Notes (a) Amortisation of acquired intangible assets were £1.8m (2004 £0.1m) and relate to Laird Technologies. (b) Exceptional items in the period were £6.0m (2004 £nil) of which £2.8m (2004 £nil) relates to Laird Technologies and £3.2m (2004 £nil) to Laird Security Systems (Note 4). (c) Capital expenditure for the period of £7.4m (2004 £8.1m) includes £4.3m (2004 £4.1m) in Laird Technologies and £3.1m (2004 £4.0m) in Laird Security Systems. (d) Depreciation charged for the period of £6.5m (2004 £4.9m) includes £3.4m (2004 £2.1m) in Laird Technologies and £3.1m (2004 £2.8m) in Laird Security Systems. Discontinued operations Revenue Operating profit 6 months 6 months 12 months 6 months 6 months 12 months to to to 31 to to to 31 30 June 30 June December 30 June 30 June December 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £m By activity:Laird Plastics - 60.9 91.9 - 1.9 3.2 ------- ------- ------- Profit on sale of businessesbefore tax - - 3.5Taxation - (0.5) (0.9) ------- ------- -------Profit for the period fromdiscontinued operations - 1.4 5.8 ------- ------- ------- Notes (a) Capital expenditure for the period was £nil (2004 £0.5m). (b) Depreciation for the period was £nil (2004 £0.4m). 4 Exceptional items 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Laird TechnologiesFlood costs net of insurance proceeds 2.2 - -Post acquisition integration costs 0.6 - -Laird Security Systems (UK)Plant closure 2.4 - -Loss on sale of business 0.8 - - --------- --------- --------- 6.0 - - --------- --------- --------- Note (a) There was a cash outflow of £3.1m in the period relating to the £6.0m exceptional charge with £2.2m of non-cash asset write-offs and £0.7m of accrued costs carried forward. 5 Earnings per share The calculation of basic and diluted earnings per share is based on a profit forthe half year of £12.3m (2004 £15.4m) and 157.2m shares (2004 142.1m), being adaily average of the shares in issue during the period. Diluted earnings pershare of 7.7p (2004 10.7p) is based on the same profit but with the number ofshares increased to 159.3m (2004 143.5m) to reflect relevant share optionsgranted but not yet exercised, share awards made and shares issuable in respectof the acquisition of subsidiaries. 6 Underlying results 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 before exceptional items and amortisation of acquired intangible assetsis equivalent to 17.5% (2004 17.1%) of the profit before exceptional items andamortisation of intangible assets. 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Profit attributable to equityshareholders 12.3 15.4 37.2Profit on sale of businesses - - (3.5)Taxation from discontinuedoperations - 0.5 0.9Taxation from continuing operations 3.9 5.0 10.6Financial instruments - fair valueadjustment 0.1 - -Exceptional items 6.0 - -Amortisation of acquiredintangible assets 1.8 0.1 1.2 --------- --------- ---------Underlying profit before tax 24.1 21.0 46.4Underlying taxation (Note 8) (4.2) (3.6) (8.0) --------- --------- ---------Underlying earnings 19.9 17.4 38.4 --------- --------- --------- Underlying earnings per share 12.7p 12.2p 26.3p --------- --------- --------- 7 Reconciliation of underlying profit before tax from IFRS to UK GAAP In this year of transition to IFRS, the Board considers it helpful to set outthe difference between underlying profit before tax on an IFRS basis and underUK GAAP. All of the capitalised development costs relate to the LairdTechnologies segment. 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Underlying profit before tax - IFRS 24.1 21.0 46.4Share based payments 0.4 0.3 0.7Capitalised development costs (0.8) - - --------- --------- ---------Underlying profit before tax - UKGAAP 23.7 21.3 47.1 --------- --------- --------- 8 Taxation The tax charge for the half year has been based on the estimated effective taxrate for the full year. 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Taxation 3.9 5.0 10.6 --------- --------- --------- Adjustments to calculate underlying taxcharge:Taxation from discontinuedoperations - 0.5 0.9Taxation on exceptional items 1.6 - -Deferred taxation on acquiredgoodwill and intangible assets (1.3) (1.9) (3.5) --------- --------- ---------Underlying tax charge 4.2 3.6 8.0 --------- --------- --------- 9 Dividends On 12 September 2005 the Board declared an interim dividend of 3.3p per share(2004 3.15p). The interim dividend will be paid on 2 December 2005 toshareholders registered on 4 November 2005. Under IFRS dividends are recorded inthe financial statements in the period in which they are declared. 10 Cash generation from operations 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Profit for the period attributableto equity shareholders 12.3 15.4 37.2Depreciation and other non-cash itemsDepreciation 6.5 5.3 11.4Exceptional asset write-downs 1.4 - -Exceptional loss / (profit) ondisposal of businesses 0.8 - (3.6)Profit on disposal of fixed assets - - (0.4)Capitalised development costs (0.8) - -Share-based payments 0.8 0.7 0.8Amortisation of acquiredintangible assets 1.8 0.1 1.2Financial instruments - fair valueadjustment 0.1 - -Pension provisions (0.1) - (1.2)Other finance costs 5.1 2.1 5.6Taxation 3.9 5.5 11.5Working capital movements (20.7) (17.6) (15.8) -------- -------- --------Cash generated from operations 11.1 11.5 46.7 -------- -------- -------- Notes (a) Cash generated from operations includes £nil (2004 £1.0m) arising from discontinued operations. (b) Working capital movements are after cash outflows of £3.1m (2004 £2.3m) in respect of exceptional costs of redundancy and restructuring and the flood at Laird Technologies. (c) Trading cash outflow in the period was £0.5m (2004 £3.0m inflow). This represents the net cash inflow from operating activities of £3.6m (2004 £8.9m) less net capital expenditure of £7.2m (2004 £8.2m) but adding back the cash outflows from exceptional items of £3.1m (2004 £2.3m). 11 Borrowings (a) Reconciliation of net borrowings 6 months to 6 months to 12 months to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Increase/(decrease) in cash andcash equivalents during the period 13.0 (0.2) 0.3Cash inflow from increase inborrowings (41.6) (12.7) (34.0)Cash inflow from decrease in shortterm deposits - (14.9) (14.9)Borrowings of businesses acquired (0.4) - (18.9)Differences on exchange onborrowings (10.5) 2.6 9.0 --------- --------- ---------Movement in net borrowings duringthe period (39.5) (25.2) (58.5)Net borrowings brought forward (118.6) (60.1) (60.1) --------- --------- ---------Net borrowings carried forward (158.1) (85.3) (118.6) --------- --------- --------- Cash and cash equivalents 33.6 20.1 20.6Current borrowings (7.3) (7.6) (4.9)Non-current borrowings (184.4) (97.8) (134.3) --------- --------- ---------Net borrowings carried forward (158.1) (85.3) (118.6) --------- --------- --------- (b) Committed borrowing facilities The Group had total committed loan facilities of £275.4m at 30 June 2005 (2004:£188.4m), of which £272.3m (2004: £182.4m) was available for more than threeyears and £186.8m was drawn at 30 June 2005 (30 June 2004 £54.8m). In August2005, £165m of these facilities were cancelled and replaced with £195m of fiveyear committed facilities. 12 Provisions for liabilities and charges Provisions carried forward at 30 June 2005 include £9.0m (2004 £3.1m) in respectof warranty and other claims arising from the disposal of businesses. 13 Post balance sheet event The Group has divested the business of Permacell Finesse, its UK uPVC windowsystems business. Net assets which were the subject of the disposal were £12.2m.Proceeds of the disposal were £10.3m. The Group remains liable for payments ofrent on a leased site for which it expects to make a provision of approximately£5m in its full year 2005 accounts. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Laird