24th Nov 2008 07:00
e2v technologies plc
Interim results for six months to 30 September 2008
e2v technologies plc, a leading developer and manufacturer of high-technology electronic components and sub-systems to the medical & science, aerospace & defence, and commercial & industrial sectors, announces its interim results for the six months ended 30 September 2008:
Highlights
|
6 months ended 30 September 2008 £ million |
6 months ended 30 September 2007 £ million |
Year ended 31 March 2008 £ million |
|
|
Revenue |
107.0 |
95.9 |
204.6 |
|
Adjusted* profit before tax |
8.5 |
7.9 |
23.4 |
|
Profit before tax |
3.1 |
3.6 |
13.7 |
|
Profit after taxation |
1.7 |
2.7 |
11.8 |
|
Total shareholders' equity |
74.3 |
64.7 |
74.5 |
|
Net debt |
(87.0) |
(92.3) |
(93.2) |
|
Earnings per share - basic |
2.74p |
4.40p |
19.36p |
|
Adjusted* earnings per share - basic |
10.32p |
9.12p |
30.24p |
Overall sales up 12%
Adjusted* profit before tax up 8%
Free cash flow at £12.5m (2007: £1.1m)
Adjusted* earnings per share up 13%
Interim dividend increased by 10% to 2.7p
Order book increased by 4% to £118m
QP Semiconductors acquisition completed in October 2008, performing in line with expectations
New divisional reporting structure implemented, as previously signalled
Commenting on the results, Keith Attwood, Chief Executive said:
"This is a strong first half performance that reflects the resilience of e2v's business model as a major global provider of specialised electronic components and subsystems. The business remains on course to meet management's expectations for the full year".
*Adjusted profit is before amortisation of acquired intangibles, business improvement programme costs and fair value losses and gains on financial instruments. Adjusted earnings is adjusted profit less tax impacts where applicable. Previously adjusted profits were also before share based payments, comparative figures have been amended to reflect this change.
Further enquiries:
|
E2v technologies plc |
||
|
Keith Attwood, Chief Executive Mike Hannant, Finance Director |
Today: 0207 831 3133 Thereafter: 01245 493 493 |
|
|
Website: www.e2v.com |
||
|
Financial Dynamics |
||
|
Jon Simmons / Sophie Kernon |
Tel: 0207 831 3133 |
Review of the half year
RESULTS OVERVIEW
The results for the first half are in line with management's expectations highlighting the resilient nature of the business portfolio.
Sales increased by 11.5% to £107.0m and adjusted* profit before tax by 8.2% to £8.5m. Reported profit before tax of £3.1m is 13.1% lower. Whilst the strengthening of the euro and US dollar has increased reported sales by 5.7%, the impact of exchange rate movements on adjusted* profits has been negligible.
Gross profit increased by 8.7% to £35.6m (2007: £32.7m) due to the sales growth and increased productivity more than offsetting cost increases on commodities, utilities and labour. The strengthening euro and US dollar relative to sterling increased gross profit but also increased selling and distribution costs and administrative costs by a similar amount.
Research and development costs (R&D) are down by 8.7% from £7.7m to £7.0m (down 17.0% at constant exchange rates). This is primarily due to the engineering resource being temporarily focussed on the resolution of manufacturing problems and improving the development process, particularly in the electron devices and subsystems division. The engineers will revert to working on R&D programmes in the second half.
Selling and distribution costs increased by 28.7% from £6.3m to £8.1m primarily due to increased tendering activity that required technical assistance from operations, further planned investment in the sales team and infrastructure, which is yielding the expected benefits, and the adverse exchange rate translation with regard to the costs of US and European sales offices.
Administrative costs, excluding amortisation of acquired intangibles, business improvement programme costs and fair value losses on foreign exchange contracts, increased by 6.8% to £8.8m from £8.2m primarily due to adverse exchange rate translation with regard to the administration of US and European locations. Amortisation of acquired intangible assets reduced to £3.6m (2007: £3.8m), business improvement programme costs amounted to £1.4m (2007: £0.5m) and fair value losses on foreign exchange contracts amounted to £0.8m (2007: £Nil). Previously adjusted* profits were also before share based payments, comparative figures have been amended to reflect this change.
Adjusted* profit before interest and tax increased by 10.8 % from £10.5m to £11.6m and the adjusted* operating margin remained at 10.9%. Finance costs increased by 19.5% to £3.4m (2007: £2.8m) due to higher interest rates and the translation impact of interest paid on euro borrowings. Finance revenue includes £0.4m (2007: £Nil) of fair value gains on interest rate swaps which are excluded from adjusted* profits. The resultant adjusted* profit before tax increased by 8.2% to £8.5m (2007: £7.9m).
Profit before tax amounted to £3.1m (2007: £3.6m).
The underlying tax rate for the first half is 14.8% (2007: 26.0%) due to the significant levels of R&D tax credits available in the UK and France. This is before taking account of a one off deferred tax charge of £1.0m for the abolition of Industrial Buildings Allowances in the charge for the first half year.
Adjusted* earnings per share of 10.32p (2007: 9.12p) increased by 13% and reported earnings per share amounted to 2.74p (2007: 4.40p), reflecting a decrease of 38%.
The Board has declared an interim dividend of 2.70p (2007: 2.45p) an increase of 10.2%, consistent with our dividend policy. The dividend will be paid on 8 January 2009 to shareholders on the register at 12 December 2008.
Free cash flow, an area of particular focus, improved from £1.1m to £12.5m in the first half of 2008. This is largely due to improvements in working capital management. Taxation and financing costs reduced free cash flow by £6.9m and the resulting reduction in net debt was £5.6m. Favourable exchange rate movements of £0.6m resulted in net debt overall reducing by £6.2m from £93.2m at 31 March 2008 to £87.0m at 30 September 2008.
BUSINESS OVERVIEW
Segmental reporting has been reviewed and the Group is now reported as four divisions with the previous sensors and semiconductors segment now being reported as three divisions; imaging, specialist semiconductors and sensors. This change will provide greater clarity to the performance of the Group and pre-empts the integration of the recent acquisition, QP Semiconductors, into the specialist semiconductor division. The electronic tubes segment has been renamed as electron devices and subsystems.
Reported sales increased by 11.5% to £107.0m. At constant exchange rates sales grew by 5.8%.
The Group continues to focus on those sectors of the economy where spend is largely non-discretionary, such as the medical, science and defence sectors. Whilst these sectors can be subject to government funding restrictions there is little evidence to date that this is occurring. The Group is not a significant supplier to consumer markets, including the automotive sector where sales are approximately 5% of revenues. e2v's products are often the critical enabling technology within our customers' systems and developing long term partnerships is not only essential to the well being of e2v but also for our customer base. The geographic and market spread of the Group results in a level of resilience to economic downturns and whilst the commercial and industrial customers may be non-committal about the future, the Group recently received an £11.0m renewal contract for a two year supply contract for electron devices for use in cancer radiotherapy equipment and cargo screening equipment.
During the half year we have seen the benefits of investing in our sales team and infrastructure. There have been significant increases in the orders received and the total of the combined order books of the imaging, specialist semiconductor and sensor divisions has increased by 27.0% to £74.9m at 30 September 2008. The overall order book at 30 September amounted to £118.3m (2007: £113m). The electron devices and subsystems division order book reduced by £10.0m due to the run-down of multiyear orders. The amount of the order book for delivery this financial year is in line with prior year at £72.0m and several multiyear orders are due for renewal before the end of the third quarter.
Electron Devices and Subsystems
Sales for the electron devices and subsystems sector increased by 22.9% to £42.5m from £34.6m. At constant exchange rates the growth was 21.0%. Sales growth was strong in all market sectors.
Growth in the medical and science sector was due to increased demand in the radiotherapy market. Several multi year orders are nearing completion and new multi year renewal contracts are currently under negotiation. Since the half year one of these anticipated orders (£11.0m for Varian Medical Systems) has been secured.
In aerospace and defence, sales were up due to continuing strong sales of electronic subsystems and the fulfilment of a $12.6m contract for the US DoD.
Commercial and industrial sales showed strong growth across marine radar, industrial processing and also cargo screening applications (which uses the same linear accelerator technology utilised in the radiotherapy market). Cargo screening demand continues to grow, driven by homeland security pressures. Sales into high power terrestrial TV broadcast are down slightly, in line with expectations, now that the business is primarily about the supply of spares into existing systems with expected lives of over 10 years.
Adjusted* profit increased by 68.0% to £10.4m (2007:£6.2m) due to the impact of operational gearing and the segment being the focus of the business improvement programme (Fit for The Future) in the UK.
The order book for the sector at 30 September was £43.4m (2007: £53.8m). £10.0m of the shortfall was due to the run-down of multi-year orders in radiotherapy outlined above. The order recently received largely eliminates this shortfall. The amount of the order book due for delivery in this financial year is £28.0m (2007: £30.0m). Sales in the second half are expected to be at similar levels to last year and the first half of this year.
Imaging
Imaging sales were up 4.9% to £29.3m from £27.9m in the first half. At constant exchange rates sales were down 4.0% year on year. The dental market remained challenging but sales held up well, being up 2.0% year on year. Growth of over 40.0% was achieved in the science market due to increased demand for the Groups' world leading high sensitivity technology but aerospace and defence imaging was down 32.0% year on year due to technical problems on key contracts delaying sales. These problems have largely been overcome and sales are expected to rebound strongly in the second half.
Commercial and industrial imaging sales were up 35.0% primarily due to new product launches in the area of machine vision and increased demand from flat panel screen manufacturing as well as paper and food processing. These new products provide greater market coverage and improved penetration for the Group.
Adjusted* profit was down 74.2% to £0.7m from £2.7m. This is primarily due to lower aerospace and defence sales, a 20% increase in R&D spend to ensure continued rapid growth in machine vision and absorption of the Group wide investment in the sales team and infrastructure. This investment has had a positive result. The order book at 30 September was £42.7m (2007: £31.5m) an increase of 35.6%.
Of the above order book £23.4m (2007:£20.6m) is due for delivery this financial year and, with a more significant contribution from the aerospace and defence sector in the second half and lower R&D spend, profit margins are expected to improve.
Specialist Semiconductors
Although reported sales in this segment are up 0.6% year on year to £20.9m from £20.8m, at constant exchange rates sales would have been lower by 9.0%. This reduction is primarily due to a high level of sales in the previous year arising from a 'last time buy' initiated by a sub-contract wafer fab process change.
In aerospace and defence, where products are supplied into both the military and commercial aircraft market as well as space communications, reported sales were flat year on year. Sales growth is expected in the second half due to new product introductions and sales of high reliability microprocessors into various defence programmes including the Eurofighter Typhoon.
Sales elsewhere were up 1.0% on a reported basis and are primarily due to the industrial, utility meter reading, scientific measurement (particularly seismology), instrumentation and automotive markets.
Adjusted* profit was down 33.9% to £2.7m from £4.0m. The reduction in division profitability was as a result of lower sales volumes and the additional investment in the sales team and infrastructure, which in turn has significantly increased orders received and order book levels. In addition, the business has won a significant contract for a sensor conditioning ASiC. Such contracts are long term and individually significant. The order book of the division at 30 September was up 35.4% to £17.2m (2007:£12.7m). Of this order book £13.0m (2007: £10.1m) is due for delivery this financial year and overall second half sales are anticipated to be equal to those in the first half. Whilst demand for high reliability microprocessors is relatively flat, there is increasing demand for the high reliability manufacturing and sub-contract test services provided by our facility in Grenoble.
Since the year end the business has acquired QP Semiconductors for an initial payment of $65m, funded by debt. A further $9m was paid for cash within the business, with the maximum consideration rising to $89m, dependant on performance. This transaction will have a significant positive impact on divisional profitability. The QP business is operating to plan post acquisition. Synergy opportunities with regard to routes to market and optimisation of engineering resource are also being pursued.
Sensors
Sensors sales were up 12.9% for the first half to £14.2m from £12.7m. At constant exchange rates, growth was 5%. The growth has been driven by a full six month's sales and strong growth of automotive sensors from the MiCS acquisition completed in May 2007, 40% sales growth (to £2.1m) from e2v scientific instruments, as well as the completion of an initial order for gas sensors into the Chinese mining industry. Following two years of strong growth in microwave components there has been a lower level of defence contract awards and sales contracted by 12%. This is primarily a phasing issue as, in particular, there is strong demand for the safety and arming technology being supplied to defence customers.
The adjusted* loss reduced to £1.0m from £1.3m in 2007. This improvement is due to the increased sales activity and a £0.2m reduction in R&D spend.
The division's Biosensors programme continues to make technical progress and remains a significant opportunity but is still some years from generating any significant revenues. The niche market the technology is addressing is over £200m and anticipated to grow at over 20% per annum. The programme incurred £0.4m of R&D costs in the first half and this is expected to continue at similar levels for the second half.
The order book for the sector at 30 September was £15.0m (2007: £14.6m). Whilst microwave, the largest unit of this division, is not expected to grow significantly this year, prospects remain positive due to the number of mid-life upgrade programmes being scheduled and the strong position, particularly within Europe, for the safety and arming technology. e2v scientific instruments' strong performance is expected to continue and a variant of the division's thermal imaging camera has been introduced, targeted at the law enforcement market.
Operational Focus
The UK Business Improvement Programme - 'Fit for the Future' has now been substantially completed and the total costs for the full year will be below £2.0m. Benefits have been seen in many key business metrics such as overdue orders and adherence to delivery schedules. This is in addition to the cost base reduction of £2.0m through this current year and £4.0m forecast for the next financial year, which helps to offset potential increases in commodity and utility prices as well as wage inflation.
The focus of the business has now shifted to embedding a culture of continuous improvement to ensure these savings are maintained and grown in future years.
Principal Risks and Uncertainties for the Second Half
The current order book supports the view that the world economic conditions are not anticipated to have any significant adverse impacts on the second half performance of the Group but the risk of customers not being able to access finance and thereby incurring financial difficulties has increased. In addition, further orders for second half delivery are required to meet management's expectations and there remains a risk that these could be delayed or deferred by customers.
When acquiring businesses from proprietors, there is an operational risk that the business will not perform as anticipated. The former proprietors of QP semiconductor, Inc. remain with the business and are motivated to ensure the business performs, due to a meaningful earn out being in place.
The majority of the Group's currency exposure is covered by forward exchange contracts and the Group's interest rate exposure on borrowings is largely contracted for or covered by an interest rate swap.
Outlook
The current order book levels, together with further recent contract awards and the limited exposure to consumer markets, support the management's view that the business remains on course to meet their expectations for the full year.
G Kennedy K Attwood
Chairman Chief Executive Officer
24 November 2008 24 November 2008
*Adjusted profit is before amortisation of acquired intangibles, business improvement programme costs and fair value losses and gains on financial instruments. Adjusted earnings is adjusted profit less tax impacts where applicable.
Directors' Responsibilities
We confirm that to the best of our knowledge:
The condensed set of financial statements has been prepared in accordance with IAS 34;
The interim management report includes a fair review of the information required by DTR 4.2.7R of the 'Disclosure and Transparency Rules', being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year: and
The interim management report includes a fair review of the information required by DTR 4.2.8R of the 'Disclosure and Transparency Rules', being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during the period; and any changes in the related party transactions described in the last annual report that could do so.
The Directors of e2v technologies plc are listed in the Group's Annual Report for the year ended 31 March 2008.
K Attwood M Hannant
Chief Executive Officer Group Finance Director
24 November 2008 24 November 2008
Independent review report to e2v technologies plc
INTRODUCTION
We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 30 September 2008 which comprises the Group income statement, Group statement of recognised income and expense, Group balance sheet, Group cash flow statement and the related notes 1 to 11. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept 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 financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of e2v technologies plc are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP
Cambridge
24 November 2008
GROUP income statement
For the six months ended 30 September 2008
|
6 months ended |
6 months ended |
Year ended |
|||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|||
|
Note |
£000 |
£000 |
£000 |
||
|
(Restated) |
|||||
|
Revenue |
2 |
106,985 |
95,947 |
204,607 |
|
|
Cost of sales |
(71,432) |
(63,236) |
(132,213) |
||
|
Gross profit |
35,553 |
32,711 |
72,394 |
||
|
Research and development costs |
(6,997) |
(7,663) |
(13,988) |
||
|
Selling and distribution costs |
(8,143) |
(6,327) |
(13,957) |
||
|
Administrative costs |
(14,555) |
(12,486) |
(25,020) |
||
|
Operating profit |
5,858 |
6,235 |
19,429 |
||
|
Finance costs |
7 |
(3,366) |
(2,816) |
(6,183) |
|
|
Finance revenue |
645 |
193 |
501 |
||
|
Adjusted profit before taxation |
2 |
8,517 |
7,872 |
23,410 |
|
|
Amortisation of acquired intangible assets |
(3,609) |
(3,782) |
(7,310) |
||
|
Business improvement programme costs |
(1,388) |
(478) |
(1,996) |
||
|
Fair value losses on foreign exchange contracts |
(774) |
- |
(357) |
||
|
Fair value gains on interest rate swaps |
391 |
- |
- |
||
|
Profit before taxation |
2 |
3,137 |
3,612 |
13,747 |
|
|
Income tax expense |
4 |
(1,447) |
(944) |
(1,948) |
|
|
Profit for the period attributable to equity holders of the parent |
1,690 |
2,668 |
11,799 |
||
|
Earnings per share - basic |
8 |
2.74p |
4.40p |
19.36p |
|
|
Earnings per share - diluted |
8 |
2.73p |
4.34p |
19.20p |
|
|
Adjusted earnings per share - basic |
8 |
10.32p |
9.12p |
30.24p |
|
|
Adjusted earnings per share - diluted |
8 |
10.28p |
8.98p |
30.00p |
|
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the six months ended 30 September 2008
|
6 months ended |
6 months ended |
Year ended |
|||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|||
|
£000 |
£000 |
£000 |
|||
|
(Losses)/gains on cash flow hedges taken directly to equity |
(80) |
489 |
(79) |
||
|
Exchange differences on retranslation of foreign operations |
324 |
(163) |
1,296 |
||
|
Actuarial gain on post employment employee benefits |
158 |
205 |
210 |
||
|
Tax on items taken directly to or transferred from equity |
(5) |
(266) |
(697) |
||
|
Net income recognised directly in equity |
397 |
265 |
730 |
||
|
Profit for the period |
1,690 |
2,668 |
11,799 |
||
|
Total recognised income and expense for the period |
2,087 |
2,933 |
12,529 |
||
|
GROUP balance sheet |
|||||
|
at 30 September 2008 |
|||||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|||
|
Note |
£000 |
£000 |
£000 |
||
|
Assets |
|||||
|
Non-current assets |
|||||
|
Property, plant and equipment |
5 |
38,743 |
36,499 |
40,191 |
|
|
Intangible assets |
88,765 |
87,018 |
93,037 |
||
|
Deferred income tax assets |
2,966 |
4,146 |
2,726 |
||
|
130,474 |
127,663 |
135,954 |
|||
|
Current assets |
|||||
|
Inventories |
41,955 |
40,280 |
43,958 |
||
|
Trade and other receivables |
52,225 |
47,094 |
54,547 |
||
|
Other financial assets |
443 |
759 |
188 |
||
|
Income tax recoverable |
1,043 |
2,503 |
2,791 |
||
|
Cash |
6,546 |
6,428 |
5,806 |
||
|
102,212 |
97,064 |
107,290 |
|||
|
Total assets |
2 |
232,686 |
224,727 |
243,244 |
|
|
Liabilities |
|||||
|
Current liabilities |
|||||
|
Trade and other payables |
(43,173) |
(40,224) |
(47,582) |
||
|
Other financial liabilities |
(9,320) |
(4,772) |
(7,442) |
||
|
Income tax payable |
(946) |
(2,257) |
(2,322) |
||
|
Provisions |
(5,325) |
(4,179) |
(4,804) |
||
|
(58,764) |
(51,432) |
(62,150) |
|||
|
Net current assets |
43,448 |
45,632 |
45,140 |
||
|
Non-current liabilities |
|||||
|
Other financial liabilities |
(85,464) |
(93,915) |
(92,073) |
||
|
Provisions |
(350) |
(539) |
(350) |
||
|
Retirement benefit obligations |
(2,905) |
(2,577) |
(3,096) |
||
|
Deferred income tax liabilities |
(10,867) |
(11,537) |
(11,125) |
||
|
(99,586) |
(108,568) |
(106,644) |
|||
|
Net assets |
74,336 |
64,727 |
74,450 |
||
|
Shareholders' equity |
|||||
|
Ordinary share capital |
3,126 |
3,074 |
3,111 |
||
|
Share premium |
41,750 |
39,935 |
41,116 |
||
|
Capital redemption reserve |
274 |
274 |
274 |
||
|
Investment in own shares held by employee benefit trust |
(6) |
(9) |
(6) |
||
|
Hedge reserve |
- |
466 |
58 |
||
|
Foreign currency translation reserve |
1,301 |
(80) |
983 |
||
|
Retained earnings |
27,891 |
21,067 |
28,914 |
||
|
Total shareholders' equity attributable to equity holders of parent company |
9 |
74,336 |
64,727 |
74,450 |
|
GROUP Cash Flow statement
For the six months ended 30 September 2008
|
6 months ended |
6 months ended |
Year ended |
|||||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|||||
|
Note |
£000 |
£000 |
£000 |
||||
|
Cash flows from operating activities |
|||||||
|
Profit from continuing operations before tax and net finance costs |
5,858 |
6,235 |
19,429 |
||||
|
Adjustments to reconcile to net cash inflows from operating activities |
|||||||
|
Depreciation of property, plant and equipment |
5 |
4,512 |
3,924 |
8,392 |
|||
|
Amortisation of intangible assets |
5,564 |
5,379 |
10,749 |
||||
|
Fair value losses on financial instruments |
774 |
- |
357 |
||||
|
Share based payment charges |
387 |
410 |
821 |
||||
|
Decrease/(increase) in inventories |
1,781 |
980 |
(753) |
||||
|
Decrease/(increase) in trade and other receivables |
2,205 |
(1,270) |
(6,474) |
||||
|
(Decrease) in trade and other payables |
(3,253) |
(7,710) |
(2,474) |
||||
|
Increase/(decrease) in provisions |
520 |
(621) |
(378) |
||||
|
Cash generated from operations |
18,348 |
7,327 |
29,669 |
||||
|
Income taxes paid |
(1,315) |
(2,201) |
(3,582) |
||||
|
Net cash flows from operating activities |
17,033 |
5,126 |
26,087 |
||||
|
Cash flows from investing activities |
|||||||
|
Proceeds from sale of property, plant and equipment |
44 |
45 |
137 |
||||
|
Interest received |
254 |
193 |
501 |
||||
|
Purchase of property, plant and equipment |
(4,043) |
(4,637) |
(10,910) |
||||
|
Purchase of software |
(588) |
(782) |
(1,670) |
||||
|
Expenditure on patents, trade marks and technology |
- |
(132) |
(117) |
||||
|
Expenditure on product development |
(1,214) |
(747) |
(2,036) |
||||
|
Acquisition of subsidiary, net of cash acquired |
- |
(5,037) |
(5,037) |
||||
|
Net cash flows used in investing activities |
(5,547) |
(11,097) |
(19,132) |
||||
|
Cash flows from financing activities |
|||||||
|
Interest paid |
(3,160) |
(2,642) |
(5,858) |
||||
|
Proceeds from issue of shares, net of expenses |
649 |
34 |
1,252 |
||||
|
Dividends paid to equity shareholders of the parent |
3 |
(3,237) |
(2,878) |
(4,380) |
|||
|
Payment of finance lease obligations |
(13) |
(7) |
(16) |
||||
|
Proceeds from borrowings |
- |
9,500 |
3,500 |
||||
|
Repayment of borrowings |
(5,097) |
- |
(4,576) |
||||
|
Net cash flows (used in) / generated from financing activities |
(10,858) |
4,007 |
(10,078) |
||||
|
Net increase / (decrease) in cash and cash equivalents |
628 |
(1,964) |
(3,123) |
||||
|
Net foreign exchange difference |
112 |
(104) |
433 |
||||
|
Cash and cash equivalents at beginning of period |
5,806 |
8,496 |
8,496 |
||||
|
Cash and cash equivalents at end of period |
10 |
6,546 |
6,428 |
5,806 |
|||
Notes to the interim group financial statements
1. Basis of preparation and accounting policies
Basis of preparation
These interim financial statements have been prepared in accordance with the accounting policies set out in the Company's 2008 Annual Report and were approved by the Board of Directors on 24 November 2008. The interim financial statements for the six months ended 30 September 2008 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The interim financial statements do not include all the information and disclosures in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2008.
Within the Group Income Statement, certain items of expenditure have been re-allocated in the six months to 30 September 2007 in order that they are directly comparable with the current period results and those for the year ended 31 March 2008. This has resulted in costs of £125k being transferred in the six month period to 30 September 2007 from administrative expenses to selling and distribution costs as well as £1,712k of costs being transferred from administrative costs to cost of sales. This has resulted in previously reported administrative costs of £14,323k now restated at £12,486k, previously reported selling and distribution costs of £6,202k, now restated at £6,327k and previously reported cost of sales of £61,524k, now restated at £63,236k.. Furthermore the presentation of the Group Income Statement has been amended to disclose adjusted profit before tax, representing profit before amortisation of acquired intangibles, business improvement programme costs, fair value losses and gains on financial instruments and tax.
Segmental reporting has been reviewed and the Group is now reported as four divisions with the previous sensors and semiconductors segment now being reported as three divisions; imaging, specialist semiconductors and sensors. This change will provide greater clarity to the performance of the Group and pre-empts the recent acquisition of QP Semiconductors into the specialist semiconductor division. The electronic tubes segment has been renamed as electron devices and subsystems.
The financial information in these interim financial statements does not constitute statutory financial statements as defined in Section 240 of the Companies Act 1985. The Group's 2008 Annual Report has been filed with the Registrar of Companies and the auditor's report on those financial statements was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.
The interim financial statements are unaudited but have been formally reviewed by the auditors, Ernst & Young LLP, and their report to the Company is set out on page 6.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2008, except for the adoption of new Standards and Interpretations, noted below. Adoption of these Standards and Interpretations did not have any effect on the financial position or performance of the Group.
IFRIC 14 and IFAS 19 'The limit on a defined benefit asset, minimum funding requirements and their interaction'
This interpretation provides guidance on how to assess the limit on the amount of surplus in a defined benefit scheme that can be recognised as an asst under IAS 19 'Employee Benefits'. The adoption of this Interpretation did not have any effect on the financial position or performance of the Group.
2. Segmental analysis
Revenue and segment result is attributable to four operating segments as detailed below:
|
Electron devices and subsystems |
Imaging devices |
Specialist semiconductors |
Sensors |
Unallocated expenses |
Total operations |
||
|
6 months ended 30 September 2008 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Revenue |
42,530 |
29,282 |
20,937 |
14,236 |
- |
106,985 |
|
|
Segment result before amortisation |
10,403 |
689 |
2,653 |
(976) |
(1,213) |
11,556 |
|
|
Exchange differences |
- |
- |
- |
- |
73 |
73 |
|
|
Interest charges (net) |
- |
- |
- |
- |
(3,112) |
(3,112) |
|
|
Adjusted profit before taxation |
10,403 |
689 |
2,653 |
(976) |
(4,252) |
8,517 |
|
|
Amortisation of acquired intangible assets |
(29) |
(603) |
(2,587) |
(390) |
- |
(3,609) |
|
|
Business improvement programme costs |
- |
- |
- |
- |
(1,388) |
(1,388) |
|
|
Fair value losses on foreign exchange contracts |
- |
- |
- |
- |
(774) |
(774) |
|
|
Fair value gains on Interest rate swaps |
- |
- |
- |
- |
391 |
391 |
|
|
Segment result and profit before tax |
10,374 |
86 |
66 |
(1,366) |
(6,023) |
3,137 |
|
|
6 months ended 30 September 2007 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Revenue |
34,608 |
27,913 |
20,822 |
12,604 |
- |
95,947 |
|
|
Segment result before amortisation |
6,192 |
2,675 |
4,011 |
(1,306) |
(1,323) |
10,249 |
|
|
Exchange differences |
- |
- |
- |
- |
246 |
246 |
|
|
Interest charges (net) |
- |
- |
- |
- |
(2,623) |
(2,623) |
|
|
Adjusted profit before taxation |
6,192 |
2,675 |
4,011 |
(1,306) |
(3,700) |
7,872 |
|
|
Amortisation of acquired intangible assets |
- |
(761) |
(2,697) |
(319) |
(5) |
(3,782) |
|
|
Business improvement programme costs |
- |
- |
- |
- |
(478) |
(478) |
|
|
Segment result and profit before tax |
6,192 |
1,914 |
1,314 |
(1,625) |
(4,183) |
3,612 |
|
|
Year ended 31 March 2008 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Revenue |
75,776 |
60,578 |
39,826 |
28,427 |
- |
204,607 |
|
|
Segment result before amortisation |
17,521 |
7,200 |
6,434 |
(481) |
(2,380) |
28,294 |
|
|
Exchange differences |
- |
- |
- |
- |
798 |
798 |
|
|
Interest charges (net) |
- |
- |
- |
- |
(5,682) |
(5,682) |
|
|
Adjusted profit before taxation |
17,521 |
7,200 |
6,434 |
(481) |
(7,264) |
23,410 |
|
|
Amortisation of acquired intangible assets |
- |
(1,390) |
(5,222) |
(698) |
- |
(7,310) |
|
|
Business improvement programme costs |
- |
- |
- |
- |
(1,996) |
(1,996) |
|
|
Fair value losses on foreign exchange contracts |
- |
- |
- |
- |
(357) |
(357) |
|
|
Segment result and profit before tax |
17,521 |
5,810 |
1,212 |
(1,179) |
(9,617) |
13,747 |
|
The following table presents total assets by operating segment -
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|||
|
Total assets |
|||||
|
Electron devices and subsystems |
25,036 |
21,655 |
26,878 |
||
|
Imaging devices |
53,153 |
51,338 |
54,653 |
||
|
Specialist semiconductors |
48,116 |
48,665 |
52,276 |
||
|
Sensors |
20,778 |
19,758 |
20,885 |
||
|
Total segment assets |
147,083 |
141,416 |
154,692 |
||
|
Goodwill |
9,709 |
9,709 |
9,709 |
||
|
Intangible assets |
4,641 |
4,984 |
4,993 |
||
|
Property, plant and equipment |
8,720 |
7,552 |
8,116 |
||
|
Deferred tax |
2,966 |
4,146 |
2,726 |
||
|
Current assets |
59,567 |
56,920 |
63,008 |
||
|
Total consolidated assets |
232,686 |
224,727 |
243,244 |
||
2. Segmental analysis - continued
|
6 months ended |
6 months ended |
Year Ended |
|||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|||
|
£000 |
£000 |
£000 |
|||
|
Sales by destination |
|||||
|
United Kingdom |
20,229 |
23,879 |
50,275 |
||
|
North America |
35,514 |
25,790 |
56,194 |
||
|
Europe |
39,505 |
37,227 |
76,544 |
||
|
Asia Pacific |
10,026 |
7,310 |
17,868 |
||
|
Rest of World |
1,711 |
1,741 |
3,726 |
||
|
106,985 |
95,947 |
204,607 |
|||
3. Dividends
|
6 months ended |
6 months ended |
Year ended |
||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
||
|
£000 |
£000 |
£000 |
||
|
Final dividend for 2008: 5.25p (2007: 4.75p) per share |
3,237 |
2,878 |
2,878 |
|
|
Interim dividend for 2008: 2.45p per share |
- |
- |
1,502 |
|
|
3,237 |
2,878 |
4,380 |
||
The number of shares owned by the employee benefit trust is 518,856 (884,239 at 30 September 2007 and 626,239 at 31 March 2008). The employee benefit trust has waived its right to receive dividends. On 21 November 2008 the Board declared an interim dividend of 2.70p per share (2007: 2.45p). The interim ordinary dividend is to be paid on 8 January 2009 to shareholders on the register at close of business on 12 December 2008.
4. Income tax
The tax charge for the period has been calculated on the basis of the Directors' best estimate of the underlying annual effective tax rate for the year of 14.8% (2007: 26.0%). This is before taking account of a one-off deferred tax charge in the period of £983,000 in respect of an increase in the UK deferred tax liability arising on the abolition of Industrial Buildings Allowances. The impact of this change is to increase the tax rate in the first half to 46.1%. The expected impact on the full year tax rate is an increase from the underlying rate of 14.8% to a reported 19.8%. The lower tax rate in the current period reflects increased claim levels of R&D tax credits.
5. Property, plant and equipment
|
6 months ended |
6 months ended |
Year ended |
||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
||
|
£000 |
£000 |
£000 |
||
|
Opening net book value |
40,191 |
35,192 |
35,192 |
|
|
Additions |
4,043 |
4,369 |
10,643 |
|
|
Acquisition of subsidiary |
- |
607 |
607 |
|
|
Disposals |
(44) |
(45) |
(146) |
|
|
Depreciation |
(4,512) |
(3,924) |
(8,392) |
|
|
Exchange adjustment |
(935) |
300 |
2,287 |
|
|
Closing net book value |
38,743 |
36,499 |
40,191 |
|
6. Commitments
Capital commitments
At 30 September 2008, the Group had capital commitments of £2,864,000 (30 September 2007: £2,373,000; 31 March 2008 £4,056,000) principally relating to the acquisition of new plant and machinery.
7. Finance costs
|
6 months ended |
6 months ended |
Year ended |
||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
||
|
£000 |
£000 |
£000 |
||
|
Bank loan interest |
3,182 |
2,643 |
5,802 |
|
|
Amortisation of capitalised debt issue costs |
184 |
173 |
355 |
|
|
Fair value adjustments to financial instruments |
- |
- |
26 |
|
|
3,366 |
2,816 |
6,183 |
||
8. Earnings per share
The calculated basic and diluted earnings per share is based on the following:
|
6 months ended |
6 months ended |
Year ended |
|
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|
|
£000 |
£000 |
£000 |
|
|
Profit for the period |
1,690 |
2,668 |
11,799 |
Adjusted earnings per share is arrived at using the following earnings and share numbers:
|
6 months ended |
6 months ended |
Year ended |
|
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|
|
£000 |
£000 |
£000 |
|
|
Profit for the period |
1,690 |
2,668 |
11,799 |
|
Amortisation of acquired intangible assets |
3,609 |
3,782 |
7,310 |
|
Business improvement programme costs |
1,388 |
478 |
1,996 |
|
Fair value losses on financial instruments |
383 |
- |
357 |
|
Tax impact of the above |
(1,688) |
(1,396) |
(3,112) |
|
Tax impact of abolition of IBAs |
983 |
- |
- |
|
6,365 |
5,532 |
18,350 |
|
|
Weighted average number of shares |
No. 000 |
No. 000 |
No. 000 |
|
For basic and adjusted earnings per share |
61,694 |
60,590 |
60,951 |
|
Effect of dilution: |
|||
|
Options |
233 |
943 |
501 |
|
For diluted earnings per share |
61,927 |
61,533 |
61,452 |
The adjusted earnings per share is considered to more appropriately reflect the underlying performance of the business. This reflects that the costs highlighted above are expected to be either non-recurring or not comparable between periods.
9. Consolidated statement of changes in shareholders' equity
|
6 months ended |
6 months ended |
Year ended |
|||
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|||
|
Note |
£000 |
£000 |
£000 |
||
|
Opening equity |
74,450 |
64,228 |
64,228 |
||
|
Total recognised income for the period / year |
2,087 |
2,933 |
12,529 |
||
|
Dividends on equity shares 3 |
(3,237) |
(2,878) |
(4,380) |
||
|
New share capital subscribed |
649 |
34 |
1,252 |
||
|
Share based payment charges |
387 |
410 |
821 |
||
|
Closing equity |
74,336 |
64,727 |
74,450 |
||
10. Analysis of movements in net debt
|
6 months ended |
6 months ended |
Year ended |
|
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
|
|
£000 |
£000 |
£000 |
|
|
Cash at beginning of period |
5,806 |
8,496 |
8,496 |
|
Loans at beginning of period |
(99,004) |
(87,153) |
(87,153) |
|
Net debt at beginning of period |
(93,198) |
(78,657) |
(78,657) |
|
Increase / (decrease) in cash |
628 |
(1,964) |
(3,123) |
|
Loans advanced |
- |
(9,500) |
(3,500) |
|
Loans repaid |
5,097 |
- |
4,576 |
|
Finance leases arising on acquisition |
- |
(7) |
- |
|
Finance leases repaid |
13 |
7 |
16 |
|
Amortisation of capitalised loan issue costs |
(184) |
(173) |
(355) |
|
Exchange differences |
633 |
(1,965) |
(12,155) |
|
Total movement in net debt |
6,187 |
(13,602) |
(14,541) |
|
Cash at end of period |
6,546 |
6,428 |
5,806 |
|
Loans at end of period |
(93,557) |
(98,687) |
(99,004) |
|
Net debt at end of period |
(87,011) |
(92,259) |
(93,198) |
|
Cash and cash equivalents: |
|||
|
Total cash at bank and in hand |
6,546 |
6,428 |
5,806 |
11. Post balance sheet event - business combinations
Acquisition of QP Semiconductor, Inc.
On 10 October 2008, e2v technologies plc acquired 100% of the voting shares of QP Semiconductor, inc. an unlisted company based in North America specialising in the design and manufacture of specialised semiconductors. Due to the recent nature of this acquisition it has not been practical to complete the fair value opening balance sheet for the assets and liabilities acquired. Total consideration, including costs, of the acquisition is estimated at £49.3m.
Related Shares:
E2V.L