27th Nov 2007 07:01
Sepura PLC27 November 2007 Sepura plc - interim results for the six months to 30 September 2007 CAMBRIDGE, England, 27 November 2007 - Sepura plc (LSE: SEPU), a leading provider of TETRA digital radios, today announces its interim results for the six months to 30 September 2007. This is the first set of results since the company listed on the main market of the London Stock Exchange in August 2007. A presentation of the results will be held today, 27 November 2007, at 9.00am atthe offices of Goldman Sachs, Peterborough Court, 133 Fleet Street, London EC4A2BB. Key numbers £m, unless indicated otherwise Six months Six months % change Year ended ended 30 ended 30 31 March September September 2007 2007 2006 Revenue 33.0 23.9 +38% 52.0 Gross margin % 54.0% 54.5% - 55.2% EBITDA 8.2 4.7 +74% 12.0 EBITDA (pre IPO costs) 10.3 5.6 +84% 13.6 Operating profit 5.6 2.5 +124% 7.6 Operating profit (pre IPO costs) 7.7 3.4 +126% 9.2 Diluted EPS (pence per share) 2.7p 1.6p +69% 4.4p Diluted EPS (pre IPO costs) (pence per share) 4.2p 2.2p +91% 5.5p Increase/(decrease) in cash 5.6 (3.0) - 3.4 Note % change relates to year on year growth six months ended 30 September 2007v six months ended 30 September 2006 Highlights •On target performance across the business •Very strong growth in revenue and profit •High and stable gross margin •Order in-take up 37% - International +42%, UK +30% •Sales to over 60 countries, of which 9 are new to Sepura •Metropolitan Police contract confirms leadership in surveillance market Phil Nolan, Chairman, commented: "The financial half-year ending September 2007 has been a particularly busy andexciting period for Sepura. The company reached a significant milestone in itscorporate history as it made its debut on the main market of the London StockExchange in August 2007. I would like to take this opportunity to welcome ournew shareholders to the register and to thank them for their support. I wouldalso like to thank all of Sepura's employees for their continued dedication andhard work. "The company has maintained its relentless focus on winning new business and onstrengthening its relationships with existing customers. We have signed a numberof significant contracts in the UK and internationally and we have continued togenerate sales to a diverse mix of existing and new customers. In the UK wesecured a key contract to supply the Metropolitan Police with more than 3,000TETRA radios as well as significant follow-on orders from the Airwave Ambulancecontract. Internationally, we won a large number of public safety contractsthroughout the world including Spain, Sweden, Hungary, Brazil, Korea and otherAsian countries. I am particularly encouraged by this increasing momentum ininternational markets, where we have sold a broad mix of products to more than60 countries. "Our success is driven by what we believe to be our best in class product rangesupported by our emphasis on strong after-sales support and customer service.Our ongoing investment in research and development ensures that we remain at thecutting edge of TETRA technology and continue to be first to market withinnovative features and products. "In the longer term, as TETRA develops as the dominant digital technology forpublic safety communications across the world, the market for TETRA productswill continue to grow. Sepura is well positioned to respond to this growingdemand and to meet the needs of organisations as they make the transition fromanalogue to digital radios. Our performance in the year to date has been strongand trading in the current financial period has been in line with ourexpectations. We remain confident in the future outlook for Sepura." Contacts For further information please contact: Sarah Daly, Powerscourt (Financial PR advisors to Sepura) on +44 (0)207 250 1446 Introduction Sepura plc has delivered a strong first half for financial year 2008, the firstset of published results since listing on the London Stock Exchange in August2007. The company has delivered significant growth in revenue and profits. Ithas maintained its gross profit margin at 54% and grown operating profit (preIPO costs) to 23% of revenue. It has continued its programme of investment inresearch and development and sales, marketing and general administrative supportto underpin the future growth of the company. The company has been strongly cashgenerative and retains an overall strong balance sheet position. About Sepura Sepura is a global leader in the design, manufacture and supply of TETRA digitalradios, used predominantly by the emergency services around the world and in thetransport, utilities and local government sectors. It is the market leader inmore than 20 countries. The TETRA standard was developed mainly for public safety professionals. Itfacilitates reliable radio communication at all times and offers secure voiceand data transmissions - free from the possibility of eavesdropping. Founded in the UK in 2002, Sepura has rapidly expanded across the world with anetwork of 70+ regional partners that sell and support locally itsmarket-leading products in over 90 countries. It joined the main list of the London Stock Exchange in August 2007 and in theyear ended March 2007, generated revenues of £52m and EBITDA of £13.6m (pre IPOcosts). Sepura's development expertise is focused entirely on TETRA radio terminals, andthe company offers the broadest range of TETRA products available. It is oftenfirst to market with innovative products and features and is a market leader inthe supply of surveillance and other specialist TETRA radios and accessories. Summary Financial Information Summary financial information is set out below. There are no changes to theaccounting policies from those described in the annual accounts to 31 March2007. £m, unless indicated otherwise Half -Year Ended 30 September 30 September % change 2007 2006Units sold (000's) 56.8 34.4 +65%Revenue 33.0 23.9 +38%Gross profit 17.8 13.0 +37%Gross profit margin % 54.0% 54.5% -Research & development costs (3.5) (4.4) -20%Selling and marketing costs (4.4) (3.2) +37%Administrative expenses (pre IPOcosts) (2.2) (2.0) +10%Total operating expenditure (pre IPOcosts) 10.1 9.6 +5%EBITDA (pre IPO costs) 10.3 5.6 +84%Operating profit (pre IPO costs) 7.7 3.4 +126%Operating profit margin % (pre IPOcosts) 23% 14% +64%Net financial (expense)/income (0.3) 0.1Profit before tax (pre IPO costs) 7.4 3.5 +111%IPO costs (2.1) (0.9) +133%Profit before tax 5.3 2.6 +104%Income tax expense (1.5) (0.5) +200%Profit for the period 3.7 2.1 +76%Diluted EPS (pence per share) 2.7p 1.6p +69%Diluted EPS (pence per share) pre IPOcosts 4.2p 2.2p +91% Operating and Financial Review Financial Review Revenue and Gross Margin Revenue in the six months to September 2007 was £33.0m, an increase of 38% overthe same period last year. Units shipped (number of radio terminals delivered tocustomers) were 56,800 compared to 34,400 in the same period last year, anincrease of 65%. The increase in revenue and units shipped reflects significantgrowth in both the UK and International business. Gross margin has remained stable at 54% compared to the same period last year. The results by geographic segment are as follows: Half Year ended 30 September 2007 30 September 2006 Revenue Units sold Gross Margin Revenue Units sold Gross Margin £m (000's) % £m (000's) %UK 15.7 16.6 67% 11.3 8.3 68%International 17.3 40.2 48% 12.6 26.1 48%Central costs - - 3% - - 3% TOTAL 33.0 56.8 54% 23.9 34.4 54.5% UK Business The UK is the largest and most mature TETRA market in the world and continues tobe Sepura's largest single market. In the six months ended 30 September 2007 UKrevenue was £15.7m, an increase of 39% over the same period last year,representing 48% of total revenue (47% in the six months to 30 September 2006). Units sold doubled to 16,600 in the period. UK order intake in the periodincreased by 30%. The main drivers of this growth have been: •Continuing deliveries of surveillance products to the UK police forces and other UK customers where Sepura maintains a significant market share •Continuing deliveries under the Airwave Ambulance contract where Sepura has won all business to date •Increasing sales of radios, batteries and other accessories to existing police customers Gross margin fell from 68% to 67% as a result of product mix, with product costsavings offsetting any underlying decrease in sales prices. Although the UK market is mature, Sepura expects it to remain a large andimportant market for the company driven by: •Continuing 'trend' sales of radios, batteries, accessories and other repeat business •The replacement cycle for existing customers upgrading to newer products, a number of which are already underway and more which are expected to commence shortly •Growth in new users on the network International Business The International business continues to be the main area of anticipated salesgrowth for Sepura, driven by the increasing adoption of TETRA by public safetyagencies around the world. Globally, TETRA remains the dominant public safetystandard (other than in North America) and the company remains confident aboutthe long term growth of the TETRA market and demand for its products. In the six months ended 30 September 2007 International revenue was £17.3m, anincrease of 37% over the same period last year, representing 52% of totalrevenue (53% in the six months to 30 September 2006). Units sold increased 54%to 40,200. International order intake in the period increased by 42%. The main drivers of this growth have been: •Major non surveillance public safety contract wins in Europe - in Spain, Sweden, Hungary, Macedonia and in South America and in Asia, particularly Korea •Increased battery and other accessory sales The results have been impacted by lower surveillance business due to the delayinto the second half of the year of two contracts won earlier in the year. Gross margin remained stable at 48%. This reflects an increase in higher marginsoftware sales offset by the mix impact of the delayed surveillance business.Whilst sales prices decreased in a number of our markets this was offset byproduct cost savings achieved in the period. The revenue and gross margins were not materially impacted by foreign exchangemovements. Key future international markets include Germany, where the first tenders areexpected in early 2008, and Italy where the first deliveries are also expectedin early 2008. In addition the Netherlands has recently tendered for replacementof their existing TETRA terminals and Sepura is one of the three appointedsuppliers. Opportunities also continue to grow in regions such as South America,Asia and the Middle East as new TETRA network contracts are signed and alreadycontracted networks are deployed. Operating Expenses Operating expenses in the period were in line with company expectations. Research and development costs Gross research and development spend increased 14% from £5.8m (24% of revenue)to £6.6m (20% of revenue). This is in line with the continuing investment in newproduct and functionality development for customers. In particular, focus hasbeen maintained on developing products for new markets and in preparing thecompany for the longer term changes in TETRA market requirements. The net research and development charge after capitalisation /amortisationdecreased by 20% from £4.4m (18% of revenue) to £3.5m (11% of revenue). This ismainly as costs associated with a major project in 2006 were written off asincurred rather than capitalised, in line with the company's accounting policyfor long term contracts. Selling and marketing costs Selling and marketing costs increased 37% from £3.2m to £4.4m. This reflectscontinuing recruitment and investment in the development of our internationalsales team, distribution network and marketing programmes. Administrative expenses Administrative expenses excluding IPO costs increased 10% from £2.0m to £2.2m.This is due to additional headcount in operations to support the growth in thebusiness and increased workload arising from plc status. Operating profit EBITDA (pre IPO costs) increased to £10.3m from £5.6m. Operating profit (pre IPOcosts) has more than doubled to £7.7m compared to £3.4m last year. Net financial expense / income Net interest paid of £0.3m this year compares to net interest received of £0.1mlast year. This is as a result of a £15m loan taken out in October 2006. IPO costs IPO costs charged in the first half were £2.1 million taking total expectedcosts to £4.3m, in line with the amount indicated in the Prospectus. Profit before Tax Profit before tax increased to £5.3m compared to £2.6m in the same period lastyear (£7.4m compared to £3.5m excluding IPO costs). Tax The tax charge for the period is £1.5m, representing an effective rate of 29%compared to the same period last year of £0.5m (17% effective rate). Majorfactors impacting this rate are the non-deductibility for tax of certain of theIPO costs offset by the research and development tax credits available to thecompany. Due to the availability of tax losses arising on the exercise of share optionsunder the EMI share scheme no cash tax liability is expected for either the yearending 31 March 2007 or 31 March 2008. Profit for the period Profit after tax for the period was £3.7m, compared to £2.1m in the previousyear. Earnings Per Share Half year ended 30 September 2007 30 September 2006 (pence) (pence)Diluted 2.7 1.6Diluted excluding IPO costs 4.2 2.2 Diluted EPS have increased 69% to 2.7p per share and diluted EPS (excluding IPOcosts) have increased by 91% to 4.2p per share, in line with the increasedprofit for the period. Manufacturing Sepura outsources the manufacture of radio terminals to Siemens in Austria. Therelationship remains strong and Sepura continues to work closely with Siemens toleverage their purchasing power and to further drive down product costs. As Sepura's operations and sales in Asia continue to grow, the company hasestablished a manufacturing presence in the region. In May 2007, Sepura enteredinto an agreement with TCB, a Chinese state-controlled manufacturer which Sepurabelieves will enable it, in due course, to achieve substantial product savings.Significant progress has been made in finalising the arrangements of thiscontract, including consent of all Intellectual Property Rights ('IPR') holders.Production is now expected to commence in Q1 of 2008. This is a few weeks laterthan previously expected due to delays in completing the IPR arrangements. Employees Sepura continues to attract and recruit new high-quality professionals,supported by its increasing size and reputation and its plc status. Totalemployees increased from 266 (including 46 contractors) at 30 September 2006 to329 (including 62 contractors) at 30 September 2007, in line with companyexpectations. The major areas of recruitment continue to be in research anddevelopment, sales and marketing and logistics to support the company's futuregrowth prospects. The changes in the Board over the past year as a result of the listing on theLondon Stock Exchange are set out in the Prospectus. There have been no changesin the Board since this date. Dividends As set out in the IPO Prospectus the company expects that, in the absence ofunforeseen circumstances, the first dividend to be declared will be the finaldividend for the year ending 31 March 2008. Thereafter, the Directors intend torecommend an interim and final dividend in respect of each financial year in theapproximate proportions of one-third and two-thirds respectively of the annualdividend. Key cash flow items Cash in the period increased by £5.6m, compared to a decrease of £3m in the sameperiod last year. The increase is due to: •Cash collected from high year end debtors •Cash generated from profits after investing in capex, paying IPO costs and paying tax relating to the year ended 31 March 2006 The outflow last year was due mainly to increased working capital for stock anddebtors. Key balance sheet movements The company continues to have a strong balance sheet. Total borrowings includingfinance leases are £15.2m with cash of £14.2m. Intangible assets increased to£14.1m from £8.6m in the same period last year as a result of the increasedcapitalisation of research and development costs in line with the increase inspend. Property, plant and equipment increased to £3.7m from £2.6m mainly inrelation to test equipment for increased production. The working capital position improved slightly with a small increase in stockoffset by lower debtors and increased trade and other payables. The deferred taxasset increased to a net asset of £5.5m as a result of the losses arising on theEMI share option scheme. Shareholders' equity increased to £24m after paying adividend of £9.8m in the second half of the 2006 financial year. Principal risks and uncertainties The principal risks and uncertainties facing the company's business remain thosedetailed on page 5 of the Annual Report for the year ended 31 March 2007. A copy of these financial statements is available on the company's web site. Thecompany has set up a Risk Committee in accordance with corporate governancerequirements. This committee will review and update the principal risks facingSepura and ensure that appropriate mitigating action is taken to neutralisethese risks to the extent possible. Corporate Governance During and since the IPO process the company made good progress in establishingthe policies, procedures and processes required to make it compliant withcorporate governance requirements. The company expects to be largely compliantby 31 March 2008. Related parties Related party disclosures are given in Note 14 of the financial statements thatfollow. Outlook Results for the first six months are in line with the Board's expectations andthe outlook for the full year continues to be in line with the Board's view atthe time of the Prospectus. Exact revenue for the year will depend on theprecise timing of some individual projects in the final quarter. Growth in TETRA markets around the world continues to be driven by public safetymarkets' requirements for digital communications equipment and we expect thisgrowth to continue in the future. Forward-looking statements Certain statements in this half-year report are forward-looking. Although thecompany believes that the expectations reflected in these forward-lookingstatements are reasonable, no assurance can be given that these expectationswill prove to have been correct. Because these statements involve risks anduncertainties, actual results may differ materially from those expressed orimplied by these forward-looking statements. The company undertakes no obligation to update any forward-looking statementswhether as a result of new information, future events or otherwise. Sepura website The Directors are responsible for the maintenance and integrity of the company'swebsite. Legislation in the United Kingdom governing the preparation anddissemination of financial statements may differ from legislation in otherjurisdictions. Sepura plc Condensed Consolidated Financial Statements for the half-year ended 30 September 2007 Registered Number 4353801 Independent review report to Sepura plc Introduction We been engaged by the company to review the condensed consolidated financialstatements in the half-year financial report for the six months ended 30September 2007, which comprises the condensed consolidated half-year incomestatement, condensed half-year consolidated statement of changes in equity,condensed half-year consolidated balance sheet, condensed half-year consolidatedstatement of cash flows and related notes. We have read the other informationcontained in the half-year financial report and considered whether it containsany apparent misstatements or material inconsistencies with the information inthe condensed consolidated financial statements. Directors' responsibilities The half-year financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 2, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-year financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-year financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of theFinancial Services Authority and for no other purpose. We do not, in producingthis report, accept or assume responsibility for any other purpose or to anyother person to whom this report is shown or into whose hands it may come savewhere expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-year financial reportfor the six months ended 30 September 2007 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted bythe European Union and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority. PricewaterhouseCoopers LLP Chartered Accountants 26 November 2007 Cambridge Condensed consolidated half-year income statement ------------------------ ----- ---------- ---------- -------- Note Half-year ended Half-year ended Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000------------------------ ----- ---------- ---------- --------Revenue 32,998 23,897 51,987Cost of sales (15,195) (10,863) (23,276)------------------------ ----- ---------- ---------- --------Gross profit 17,803 13,034 28,711------------------------ ----- ---------- ---------- --------Selling and marketingcosts (4,416) (3,240) (7,188)------------------------ ----- ---------- ---------- --------Gross Research anddevelopmentexpenditure (6,601) (5,835) (12,360)Research anddevelopment costscapitalised net ofamortisation 3,097 1,457 4,111------------------------ ----- ---------- ---------- --------Research anddevelopment costs (3,504) (4,378) (8,249)------------------------ ----- ---------- ---------- --------Administrativeexpenses excluding IPOcosts (2,209) (2,032) (4,091)IPO costs (2,104) (896) (1,606)------------------------ ----- ---------- ---------- --------Total administrativeexpenses (4,313) (2,928) (5,697)Operating profit 10 5,570 2,488 7,577Financial income 274 119 270Financial expense (588) (21) (577)------------------------ ----- ---------- ---------- --------Net financial(expense)/income (314) 98 (307)------------------------ ----- ---------- ---------- --------Profit before tax 5,256 2,586 7,270Current tax charge (468) (50) (106)------------------------ ----- ---------- ---------- --------Deferred tax charge (1,059) (400) (1,198) 33------------------------ ----- ---------- ---------- --------Income tax expense 11 (1,527) (450) (1,304)------------------------ ----- ---------- ---------- --------Profit for the period 3,729 2,136 5,966======================== ===== ========== ========== ========Attributable to: 3,729 2,136 5,966Equity holders ======================== ===== ========== ========== ========Earnings per share (pence)Basic 12 2.7 1.9 5.3Diluted 12 2.7 1.6 4.4======================== ===== ========== ========== ======== The results above relate to continuing operations. Condensed half-year consolidated statement of changes in equity ------------------------- ---------- ---------- ---------- Share Retained Total Capital earnings £'000 £'000 £'000 ------------------------- ---------- ---------- ----------At 1 April 2007 - 13,249 13,249------------------------- ---------- ---------- ----------Excess tax on share option scheme - 7,167 7,167Reversal of excess tax on share optionscheme on - (10,397) (10,397)exercise of optionsExcess tax deductions from share optionexercises - 10,117 10,117carried forward as a deferred tax asset ---------- ---------- -----------------------------------Net income recognised in equity - 6,887 6,887------------------------- ---------- ---------- ----------Profit for the period - 3,729 3,729------------------------- ---------- ---------- ----------Total recognised income and expense - 10,616 10,616------------------------- ---------- ---------- ----------Employee share option scheme:- value of employee services - 164 164Share capital issued from equity 68 (68) -------------------------- ---------- ---------- ----------At 30 September 2007 68 23,961 24,029========================= ========== ========== ========== ------------------------- ---------- ---------- ---------- Share Retained Total Capital earnings £'000 £'000 £'000 ------------------------- ---------- ---------- ----------At 1 April 2006 - 15,406 15,406Excess tax on share option scheme - 1,561 1,561------------------------- ---------- ---------- ----------Net income recognised directly in equity - 1,561 1,561------------------------- ---------- ---------- ----------Profit for the period - 2,136 2,136------------------------- ---------- ---------- ----------Total recognised income and expense - 3,697 3,697------------------------- ---------- ---------- ----------Employee share option scheme:- value of employee services - 68 68------------------------- ---------- ---------- ----------At 30 September 2006 - 19,171 19,171========================= ========== ========== ========== ------------------------- ---------- ---------- ---------- Share Retained Total Capital earnings £'000 £'000 £'000 ------------------------- ---------- ---------- ----------At 1 April 2006 - 15,406 15,406Excess tax on share option scheme - 1,596 1,596------------------------- ---------- ---------- ----------Net income recognised directly in equity - 1,596 1,596------------------------- ---------- ---------- ----------Profit for the period - 5,966 5,966------------------------- ---------- ---------- ----------Total recognised income and expense - 7,562 7,562------------------------- ---------- ---------- ----------Employee share option scheme:- value of employee services - 81 81Dividends to shareholders - (9,800) (9,800)------------------------- ---------- ---------- ----------At 31 March 2007 - 13,249 13,249========================= ========== ========== ========== Condensed half-year consolidated balance sheet ------------------------ ----- --------- --------- --------- Note 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 ------------------------ ----- --------- --------- ---------Non-current assetsIntangible assets 5 14,073 8,627 10,910Property, plant and equipment 5 3,694 2,588 2,699Deferred tax asset 7 5,501 3,479 3,507------------------------ ----- --------- --------- ---------Total non-current assets 23,268 14,694 17,116------------------------ ----- --------- --------- ---------Current assetsInventories 6,930 6,314 5,961Trade and other receivables 13,005 14,733 20,066Cash and cash equivalents 14,221 2,158 8,605------------------------ ----- --------- --------- ---------Total current assets 34,156 23,205 34,632------------------------ ----- --------- --------- ---------Total assets 57,424 37,899 51,748------------------------ ----- --------- --------- ---------Current liabilitiesBorrowings 8 2,951 - 1,452Finance lease liabilities 8 291 276 283Trade and other payables 14,016 13,382 16,051Income tax payable 98 1,064 1,016Provisions 9 276 286 289------------------------ ----- --------- --------- ---------Total current liabilities 17,632 15,008 19,091------------------------ ----- --------- --------- ---------Non-current liabilitiesBorrowings 8 11,806 - 13,282Finance lease liabilities 8 126 417 273Trade and other payables 3,407 403 2,169Provisions 9 424 418 411Deferred tax liabilities 7 - 2,482 3,273------------------------ ----- --------- --------- ---------Total non-current liabilities 15,763 3,720 19,408------------------------ ----- --------- --------- ---------Net assets 24,029 19,171 13,249======================== ===== ========= ========= =========Shareholders' equityOrdinary share capital 6 68 - -Retained earnings 23,961 19,171 13,249------------------------ ----- --------- --------- ---------Total shareholders' equity 24,029 19,171 13,249======================== ===== ========= ========= ========= The condensed consolidated financial statements were approved by the board andauthorised for issue on 26 November 2007 and are signed on its behalf by: S Crowther G Matthews Director Director Condensed half-year consolidated statement of cash flows ------------------------ ---------- ---------- --------- Half-year ended Half-year ended Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 ------------------------ ---------- ---------- ---------Cash flow from operatingactivities 3,729 2,136 5,966Profit for the periodAdjustments for: 578 448 1,043Depreciation chargesAmortisation charges 2,047 1,723 3,405Equity settled share basedpayment charge 164 68 81Financial income (274) (119) (270)Financial expense 588 21 577Income tax expense 1,527 450 1,304(Increase)/decrease ininventories (969) (2,283) (1,931)(Increase)/decrease in tradeand other receivables 7,013 (887) (6,262)Increase/(decrease) in tradeand other payables (893) (400) 3,870------------------------ ---------- ---------- ---------Cash generated fromoperations 13,510 1,157 7,783Income taxes paid (811) - (104)------------------------ ---------- ---------- ---------Net cash generated fromoperating activities 12,699 1,157 7,679------------------------ ---------- ---------- ---------Cash flow from investing activitiesInterest received 274 119 270Acquisition of property,plant and equipment (1,573) (612) (1,320)Capitalised development costs (5,210) (3,552) (7,517)------------------------ ---------- ---------- ---------Net cash used in investingactivities (6,509) (4,045) (8,567)------------------------ ---------- ---------- ---------Cash flow from financing activitiesProceeds from borrowings - - 15,000Borrowings transaction costs - - (300)Interest paid (476) (21) (379)Dividends paid toshareholders - - (9,800)Repayment of finance lease (98) (91) (186)------------------------ ---------- ---------- ---------Net cash generated by/(usedin) financing activities (574) (112) 4,335------------------------ ---------- ---------- ---------Net increase/(decrease) incash and cash equivalents 5,616 (3,000) 3,447Cash and cash equivalents at1 April 8,605 5,158 5,158------------------------ ---------- ---------- ---------Cash and cash equivalents at30 September/31 March 14,221 2,158 8,605======================== ========== ========== ========= Notes to the Group financial statements for the half-year ended 30 September 2007 1. General information Sepura plc ("the Company") is incorporated and domiciled in England & Wales as apublic limited company under the Companies Act 1985. On 23 July 2007 the Companywas re-registered as a public limited company. The Company's registered officeis Radio House, St Andrew's Road, Cambridge, CB4 1GR, England. The Company has a primary listing on the London Stock Exchange. The condensed consolidated half-year financial information was approved forissue on 26 November 2007. These interim financial results do not comprise statutory accounts within themeaning of section 240 of the Companies Act 1985. Annual financial statementsfor the year ended 31 March 2007 were approved by the Board of Directors on 18July 2007 and delivered to the Registrar of Companies. The report of theauditors on those accounts was unqualified, did not contain an emphasis ofmatter paragraph and did not contain any statement under Section 237 of theCompanies Act 1985. 2. Basis of preparation This condensed consolidated half-year financial information for the six monthsended 30 September 2007 has been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34 'Interimfinancial reporting' as adopted by the European Union. The half-year condensedconsolidated financial report should be read in conjunction with the annualfinancial statements for the year ended 31 March 2007, which have been preparedin accordance with IFRS as adopted by the European Union. 3. Summary of accounting policies The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 March 2007, as described in thoseannual financial statements. Certain new standards, amendments and interpretations to existing standards havebeen published that are mandatory for the Group's accounting periods beginningon or after 1 April 2007 or later periods but which the Group has not adoptedare as follows: • IFRS 8 "Operating segments" (effective for accounting periods beginning on or after 1 January 2009). • A revision to IAS 1 "Presentation of financial statements", effective for accounting periods beginning on or after 1 January 2009, with early adoption permitted. Among other changes, the revised standard states that entities making restatements or reclassifications of comparative information will be required to present a restated balance sheet at the beginning of the comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. • Amendment to IAS 23 "Borrowing costs" (effective for accounting periods beginning on or after 1 January 2009). • IFRIC 12 "Service concession arrangements "(effective for accounting periods beginning on or after 1 January 2008). • IFRIC 13 "Customer loyalty programmes" (effective for periods on or after 1 July 2008). • IFRIC 14 "The limits on a defined benefit asset, minimum funding requirements and their interaction" (effective for accounting periods beginning on or after 1 January 2008). IFRS 8 may change the way in which the Group's segmental reporting is analysedas it adopts a management rather than a geographical/business segment approachto such reporting. However no detailed impact assessment has yet been performedpending EU ratification of this standard. Management has assessed the relevance of IAS 23 IFRIC 12, IFRIC 13, IFRIC 14 andthe revision to IAS 1 with the respect to the Group's operations and concludedthat they are not currently relevant to the Group. 4. Segment reporting ---------------- ---------- ---------- -------- --------For the half- year ended United Kingdom International Unallocated Total30 September 2007 £'000 £'000 £'000 £'000---------------- ---------- ---------- -------- --------Income statementinformation 15,696 17,302 - 32,998Segmental revenue---------------- ---------- ---------- -------- -------- Segmental operatingprofit/(loss) 10,114 6,294 (10,838) 5,570Financial income - - 274 274Financial expense - - (588) (588)Income tax expense - - (1,527) (1,527)---------------- ---------- ---------- -------- --------Profit for the period 10,114 6,294 (12,679) 3,729================ ========== ========== ======== ========Balance sheetinformation 5,943 7,038 44,443 57,424Segment assets---------------- ---------- ---------- -------- --------Intangible fixed assets - 319 13,754 14,073Property, plant andequipment - 341 3,353 3,694Deferred tax assets - - 5,501 5,501Inventories - 99 6,831 6,930Trade and otherreceivables 5,943 6,279 783 13,005Cash and cashequivalents - - 14,221 14,221================ ========== ========== ======== ========Segment liabilities 5,097 1,238 27,060 33,395---------------- ---------- ---------- -------- --------Borrowings - - 14,757 14,757Finance leaseliabilities - - 417 417Trade and otherpayables 5,097 1,238 11,186 17,521Provisions - - 700 700================ ========== ========== ======== ========Other segment informationCapital expenditure:---------------- ---------- ---------- -------- --------- tangible fixed assets - 1,573 1,573- intangible fixedassets - - 5,210 5,210================ ========== ========== ======== ========Profit and loss itemsDepreciation - - 578 578Amortisation - - 2,047 2,047Share-based paymentcharge 17 - 147 164Inventoriesobsolescence provision - 10 366 376================ ========== ========== ======== ======== Segment reporting (continued) ---------------- ---------- ---------- -------- ---------For the half- year ended United Kingdom International Unallocated Total30 September 2006 £'000 £'000 £'000 £'000---------------- ---------- ---------- -------- ---------Income statementinformation 11,311 12,586 - 23,897Segmental revenue---------------- ---------- ---------- -------- --------- Segmental operatingprofit/(loss) 7,205 5,077 (9,794) 2,488---------------- ---------- ---------- -------- ---------Financial income - - 119 119Financial expense - - (21) (21)Income tax expense - - (450) (450)---------------- ---------- ---------- -------- ---------Profit for the period 7,205 5,077 (10,146) 2,136================ ========== ========== ======== =========Balance sheetinformation 4,448 11,857 21,594 37,899Segment assets---------------- ---------- ---------- -------- ---------Intangible fixed assets - 396 8,231 8,627Property, plant andequipment - 347 2,241 2,588Deferred tax assets - - 3,479 3,479Inventories - 1,518 4,796 6,314Trade and otherreceivables 4,448 9,596 689 14,733Cash and cashequivalents - - 2,158 2,158================ ========== ========== ======== =========Segment liabilities 1,892 1,212 15,624 18,728---------------- ---------- ---------- -------- ---------Finance leaseliabilities - - 693 693Trade and otherpayables 1,892 1,212 11,745 14,849Provisions - - 704 704Deferred taxliabilities - - 2,482 2,482================ ========== ========== ======== ========= Other segment information Capital expenditure:- tangible fixed assets - - 612 612- intangible fixed assets - 24 3,528 3,552================ ========== ========== ======== =========Profit and loss itemsDepreciation - - 448 448Amortisation - 4 1,719 1,723Share-based payment charge 1 4 63 68Inventories obsolescence provision - - 367 367================ ========== ========== ======== ========= Segment reporting (continued) ---------------- ---------- ---------- -------- --------For the year ended United Kingdom International Unallocated Total31 March 2007 £'000 £'000 £'000 £'000---------------- ---------- ---------- -------- --------Income statementinformation 27,444 24,543 - 51,987Segmental revenue---------------- ---------- ---------- -------- -------- Segmental operatingprofit/(loss) 17,777 9,054 (19,254) 7,577---------------- ---------- ---------- -------- --------Financial income - - 270 270Financial expense - - (577) (577)Income tax expense - - (1,304) (1,304)---------------- ---------- ---------- -------- --------Profit for the year 17,777 9,054 (20,865) 5,966================ ========== ========== ======== ========Balance sheetinformation 11,318 9,192 31,238 51,748Segment assets---------------- ---------- ---------- -------- --------Intangible fixed assets - 374 10,536 10,910Property, plant andequipment - - 2,699 2,699Deferred tax assets - - 3,507 3,507Inventories - 800 5,161 5,961Trade and otherreceivables 11,318 8,018 730 20,066Cash and cashequivalents - - 8,605 8,605================ ========== ========== ======== ========Segment liabilities 4,235 888 33,376 38,499---------------- ---------- ---------- -------- --------Borrowings - - 14,734 14,734Finance leaseliabilities - - 556 556Trade and otherpayables 4,235 888 14,113 19,236Provisions - - 700 700Deferred taxliabilities - - 3,273 3,273================ ========== ========== ======== ======== Other segment information Capital expenditure:- tangible fixed assets - - 1,320 1,320- intangible fixed assets - 129 7,388 7,517================ ========== ========== ======== ========Profit and loss itemsDepreciation - - 1,043 1,043Amortisation - 122 3,283 3,405Share-based payment charge 2 73 6 81Inventories obsolescence provision 435 35 - 470================ ========== ========== ======== ======== 5. Capital expenditure ------------------ ---------- --------- --------Half-year ended Intangible assets Tangible assets Total30 September 2007 £'000 £'000 £'000Net book value at 1 April 2007 10,910 2,699 13,609Additions and transfers 5,210 1,573 6,783Depreciation, amortisation andother movements (2,047) (578) (2,625)------------------ ---------- --------- --------Net book value at 14,073 3,694 17,76730 September 2007------------------ ---------- --------- -------- Intangible assets comprises capitalisation of research and development costs.Major additions to tangible assets in the six months comprised test equipment,IT equipment and software, furniture and fittings. ------------------ ---------- --------- --------Half-year ended Intangible assets Tangible assets Total30 September 2006 £'000 £'000 £'000Net book value at 1 April 2006 6,798 2,424 9,222Additions and transfers 3,552 612 4,164Depreciation, amortisation andother movements (1,723) (448) (2,171)------------------ ---------- --------- --------Net book value at 8,627 2,588 11,21530 September 2006------------------ ---------- --------- -------- ------------------ ---------- --------- --------Year ended Intangible assets Tangible assets Total31 March 2007 £'000 £'000 £'000Net book value at 1 April 2006 6,798 2,424 9,222Additions and transfers 7,517 1,320 8,837Depreciation, amortisation andother movements (3,405) (1,045) (4,450)------------------ ---------- --------- --------Net book value at 10,910 2,699 13,60931 March 2007------------------ ---------- --------- -------- 6. Share capital ------------------- ----------- ---------- --------Half-year ended Number of shares Ordinary shares Total30 September 2007 £ £Opening balance at 1 April 2007 800,000 80 80Bonus issue of 699 new ordinaryshare held and consolidation ofone new ordinary shares for eachfive ordinary shares held 111,200,000 55,920 55,920Exercise of shares under employeeshare option scheme 24,353,140 12,177 12,177------------------- ----------- ---------- --------Closing balance at 30 September2007 136,353,140 68,177 68,177------------------- ----------- ---------- -------- ------------------- ----------- ---------- --------Half-year ended Number of shares Ordinary shares Total30 September 2006 £ £Opening balance at 1 April 2006 800,000 80 80------------------- ----------- ---------- --------Closing balance at 30 September2006 800,000 80 80------------------- ----------- ---------- -------- ------------------- ----------- ---------- --------Year ended Number of shares Ordinary shares Total31 March 2007 £ £Opening balance at 1 April 2006 800,000 80 80------------------- ----------- ---------- --------Closing balance at 31 March 2007 800,000 80 80------------------- ----------- ---------- -------- Employee share option scheme: options exercised during the period to 30September 2007 resulted in 24,353,140 ordinary shares being issued (30 September2006: £nil), with exercise proceeds of £17 (30 September 2006: £nil). 7. Deferred tax assets and liabilities -------------------- --------- --------- --------- 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 -------------------- --------- --------- ---------AssetsOther temporary differences (69) (86) (69)Equity settled share options (10,609) (3,393) (3,438) --------- --------- --------- (10,678) (3,479) (3,507)Offset of deferred tax liability 4,158 - -Amounts utilised 1,019 - - --------- --------- ---------Total assets (5,501) (3,479) (3,507) --------- --------- --------- LiabilitiesIntangible fixed assets 4,158 2,482 3,273Offset against deferred tax asset (4,158) - - --------- --------- ---------Total liabilities - 2,482 3,273 --------- --------- --------- NetIntangible fixed assets 4,158 2,482 3,273Other temporary differences (69) (86) (69)Equity settled share options (9,590) (3,393) (3,438)-------------------- --------- --------- ---------Net tax assets (5,501) (997) (234)-------------------- --------- --------- --------- In the six months ended 30 September 2007 a deferred tax asset of £7,154,000crystallised following the exercise of 23,353,140 share options. The recognitionof the reversal of the deferred tax asset is capped at 30% of the cumulativeremuneration expense arising on the options. The recognition of the current taxcredit arising on the tax deductions through the income statement is similarlycapped. Any current and deferred tax movements in excess of the relatedcumulative remuneration expense are recognised direct in equity. 8. Borrowings and loans ------------------- ---------- ----------- ---------- 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 ------------------- ---------- ----------- ----------Current 3,242 276 1,735Non-current 11,932 417 13,555 ------------------- ---------- ----------- ---------- Total 15,174 693 15,290 ------------------- ---------- ----------- ---------- Movements in borrowings and loans is analysed as follows:----------------------------------- --------------Half-year ended 30 September 2007 £'000Opening balance at 1 April 2007 15,290Repayments of borrowings and amortisation of loan issuecosts (116)----------------------------------- --------------Closing balance at 30 September 2007 15,174----------------------------------- -------------- ----------------------------------------- --------Half-year ended 30 September 2006 £'000Opening balance at 1 April 2006 824Repayments of borrowings (131)----------------------------------------- --------Closing balance at 30 September 2006 693----------------------------------------- -------- ----------------------------------------- --------Year ended 31 March 2007 £'000Opening balance at 1 April 2006 824Bank borrowings net of deferred loan issue costs 14,734Repayments of borrowings and amortisation of loan issuecosts (268)----------------------------------------- --------Closing balance at 31 March 2007 15,290----------------------------------------- -------- 9. Provisions ----------------------------------------- --------Half-year ended Warranty30 September 2007 provision £'000----------------------------------------- --------At 1 April 2007 700Charged to profit and loss account 233Utilised in period (233)Unutilised amount released ------------------------------------------ --------At 30 September 2007 700========================================= ======== ----------------------------------------- --------Half-year ended Warranty30 September 2006 provision £'000----------------------------------------- --------At 1 April 2006 704Charged to profit and loss account 125Utilised in period (204)Unutilised amount released 79----------------------------------------- --------At 30 September 2006 704========================================= ======== ----------------------------------------- --------Half-year ended Warranty31 March 2007 provision £'000----------------------------------------- --------At 1 April 2006 704Charged to profit and loss account 165Utilised in year (169)Unutilised amount released ------------------------------------------ --------At 31 March 2007 700========================================= ======== 10. Operating profit The following items have been charged to the operating profit during the period: -------------------- ---------- ---------- ---------- Half-year ended Half-year ended Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000-------------------- ---------- ---------- ----------Inventory obsolescenceprovision 376 367 470IPO costs 2,104 896 1,606==================== ========== ========== ========== The inventory obsolescence provision relates to products that do not comply withthe Restriction of Hazardous Substances directive and to other potentiallyobsolete stock. IPO costs were incurred for admission to the Official List and to trading on theLondon Stock Exchange. 11. Income tax expense Income tax expense is recognised based on management's best estimate of theweighted average annual income tax rate expected for the full year. The taxcharge for the period differs from the standard rate of corporation tax in theUK, which is 30%. The differences are explained below. -------------------- ---------- ---------- ---------- Half-year ended Half-year ended Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000-------------------- ---------- ---------- ----------Tax reconciliationProfit on ordinary activitiesbefore tax 5,256 2,586 7,270At standard rate ofcorporation tax in the UK 1,577 776 2,181Effects of:Research and developmentenhanced expenditure (644) (719) (1,272)Expenses not deductible fortax purposes 594 393 415Adjustment in respect ofprior year - - (20) ---------- ---------- ----------Total tax charge 1,527 450 1,304==================== ========== ========== ========== No cash tax is expected to be payable for the years to 31 March 2008 and 31March 2007 due to the availability of losses arising from exercise of options inthe EMI Share Option Scheme. 12. Earnings per share Earnings per share attributable to equity holders of the Company arise fromcontinuing operations as follows: ----------------------- ---------- ---------- ---------- 30 September 30 September 31 March 2007 2006 2007----------------------- ---------- ---------- ----------Earnings attributable to ordinaryshareholders (£'000) 3,729 2,136 5,966----------------------- ---------- ---------- ----------Number of shares:Basic weighted average number ofshares ('000) 136,353 112,000 112,000Effect of dilutive securities:Employee share options ('000) 1,139 25,431 24,367----------------------- ---------- ---------- ----------Diluted weighted average number ofshares ('000) 137,492 137,431 136,367----------------------- ---------- ---------- ----------Basic EPS (pence per share) 2.7 1.9 5.3----------------------- ---------- ---------- ----------Diluted EPS (pence per share) 2.7 1.6 4.4======================= ========== ========== ========== 13. Dividends No dividends have been paid or declared in the period. 14. Related party transactions The directors consider Kelso Place Asset Management Limited ("Kelso Place") tobe a related party by virtue of the fact that Sion Kearsey is a director of bothKelso Place and Sepura plc. Kelso Place fees were £93,000 (2006: £130,000) formanagement services during the period. £nil was due to Kelso Place at 30September 2007 (2006:£58,000). The directors consider this transaction to be onan arm's length basis. 15. Events occurring after the balance sheet date There were no significant events occurring after the balance sheet date. Statement of director's responsibilities The directors' confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 as adopted by the European Union and that theinterim management report herein includes a fair review of the informationrequired by DTR 4.2.7 and DTR 4.2.8 The directors of the Group are listed in the Group's Annual Report for 31 March2007 with the exception of the following changes in the period: Malcolm Quelchresigned on 5 June 2007, Tony Illsley was appointed on 27 June 2007 and DavidTilston was appointed on 1 July 2007. Signature; Name: Graham Matthews Date: 26 November 2007 Chief Executive Officer Signature; Name: Stephen Crowther Date: 26 November 2007 Chief Financial Officer This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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